j^Um 


HOUSE  .  .  .  . 


€ommontoealtl)  of  lllassacljusctto. 


House  of  Representatives,  April  5, 1878. 


The  Committee  on  Railroad,  to  whom  was  referred  the 
report  of  the  Committee  appointed  at  the  last  session  of  the 
legislature  to  report  to  the  present  session  “  what  action  it 
may  be  expedient  for  the  State  to  take  in  relation  to  its  in¬ 
vestment  in  the  stock  and  securities  of  the  New- York  and 
New-England  Railroad  Company,”  and  also  the  petition  of 
the  New-York  and  New-England  Railroad  Company  “for 
such  action  as  the  legislature  might  deem  expedient  for  the 
interests  of  the  State  as  the  principal  stockholder  in  said 
company,”  having  considered  the  matter  thus  referred  to 
them,  submit  the  following  Report. 

The  present  condition  of  the  company  is  as  follows  :  — 


PROPERTY  OF  THE  COMPANY. 


The  New-York  and  New-England  Railroad  Company  is  in 
possession  of  and  operates  a  railroad  from  Brookline  to 
Woonsocket  of  thirty-four  miles,  from  Boston  to  Willimantic 
of  eighty-six  miles,  from  East  Thompson  to  Southbridge  of 
seventeen  miles,  and  from  Islington  to  Dedham  of  two 
miles ;  making  an  aggregate  of  one  hundred  and  thirty-nine 
miles  of  road  now  in  the  actual  possession  of  the  company. 

It  furthermore  owns  the  Hartford,  Providence,  and  Fish- 
kill  Railroad,  which  extends  from  Providence,  through  Willi- 
mantic  (at  which  point  it  joins  the  line  now  in  the  possession 
of  the  company),  to  Waterbury,  —  a  distance  of  one  hundred 


2 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


and  twenty-two  miles.  This  portion  of  the  road  is  now 
operated  by  the  trustees  under  a  mortgage  made  by  the 
Hartford,  Providence,  and  Fishkill  Railroad  Company ;  but 
the  New-York  and  New-England  Railroad  Company  owns 
more  than  three-quarters  of  the  stock,  and  has  the  right,  by 
contract,  lease,  and  deed,  to  take  into  its  possession  and  oper¬ 
ate  the  said  railroad  upon  removing  the  encumbrances  there¬ 
on  :  so  that  practically  it  may  be  said  that  the  New-York  and 
New-England  Railroad  Company  owns  a  completed  and 
equipped  road,  in  proper  condition  for  its  traffic,  of  the 
aggregate  length  of  two  hundred  and  sixty-one  miles,  extend¬ 
ing  from  Boston  and  from  Providence  to  Waterbury,  Conn., 
or  to  within  seventy-six  miles  of  the  Hudson  River.  It  also 
owns  the  road  west  of  Waterbury,  upon  which  between 
three  and  four  million  dollars  have  been  expended,  but 
which,  being  unfinished,  is  entirely  unproductive  of  income. 

FINANCIAL  CONDITION  OF  THE  PROPERTY. 

This  property  is  subject  to  various  mortgages  and  encum¬ 
brances,  which,  together  with  the  floating  debt  of  the  com¬ 
pany,  amount,  in  the  aggregate,  to  four  million  sixteen 
thousand  six  hundred  and  ninety  dollars,  as  appears  from  the 
report  of  the  Committee  appointed  by  the  last  legislature. 
But  by  the  application  of  subsequent  earnings,  and  otherwise, 
the  debt  is  now  smaller ;  and  the  Committee  are  satisfied  that 
all  encumbrances  on  the  whole  line  can  be  removed  by  the 
expenditure  of  four  million  dollars. 

By  the  payment  of  this  amount  the  Committee  are  assured 
that  all  encumbrances  or  liens  upon  all  parts  of  the  road 
would  be  removed,  and  the  floating  debt  of  the  company 
funded ;  so  that,  by  the  payment  of  an  amount  not  exceeding 
four  million  dollars,  a  clear  and  undisputed  title  would  be 
acquired  by  the  company,  subject,  however,  only  to  the  au¬ 
thorized  mortgage  bonds  of  ten  million  dollars,  which  the 
company  propose  to  place  in  the  hands  of  the  treasurer  of 
the  Commonwealth  as  security  for  the  advance  asked  from 
the  State. 

COMPLETION  OF  THE  ROAD. 

The  committee  are  further  satisfied,  and  it  appears  by  the 
most  ample  evidence,  that  the  road  can  be  built  in  a  thorough 


1878.] 


HOUSE  — No.  276. 


8 


and  workmanlike  manner  from  Waterbury  to  the  Hudson 
River  at  a  considerably  less  cost  than  two  million  dollars ; 
but  making  due  allowance  for  any  mistakes  in  estimates,  or 
for  any  unexpected  cost  of  construction,  or  for  any  other 
obstacles  or  increased  expense  which  now  cannot  be  foreseen, 
the  Committee  estimate  the  cost  of  completing  the  road  at 
the  sum  of  two  million  dollars.  Upon  this  incomplete  por¬ 
tion  more  than  three  million  dollars  have  already  been  ex¬ 
pended. 

The  actual  estimate  of  the  cost  of  completion,  as  made  by 
engineers  and  experts  in  1876,  amounted  to  about  sixteen 
hundred  thousand  dollars ;  and  it  is  probable  that  the  road 
could  be  constructed  at  the  present  time  at  a  price  even  less 
than  this  estimate.  These  estimates,  however,  do  not  include 
the  unsettled  land  damages,  which  would  absorb  about  two 
hundred  thousand  dollars  more. 

We  annex  to  this  report  a  letter  from  George  A.  Parker, 
Esq.,  of  Lancaster  in  this  State,  whose  reputation  as  a  civil 
engineer  is  well  known,  containing  his  estimate  of  the  cost 
of  completing  the  road,  made  after  a  careful  and  thorough 
examination,  upon  which  estimate  we  think  full  reliance  can 
be  placed. 

The  Committee,  therefore,  have  come  to  the  conclusion, 
from  all  the  evidence,  that  the  road  can  be  fully  completed 
and  equipped  for  the  sum  of  two  million  dollars,  and  all 
encumbrances  on  it  removed  for  the  sum  of  four  million 
dollars:  so  that,  by  the  expenditure  of  six  million  dollars, 
a  through  line  from  Boston  and  Providence  to  the  Hudson 
River  can  be  secured,  fully  equipped,  put  in  proper  condition 
for  a  large  traffic,  and  freed  from  all  encumbrances. 

It  is  also  in  evidence  that  the  earnings  of  the  whole  road 
applicable  to  the  payment  of  interest  last  year  were  a  trifle 
over  four  hundred  thousand  dollars:  and  the  Committee 
agree  in  the  belief  that  the  road  is  a  perfect  security  for  the 
six  million  dollars  needed  to  fund  its  debts  and  to  com¬ 
plete  its  road;  and  that,  with  its  present  business  and  earn¬ 
ings,  it  can  earn  and  pay  a  reasonable  rate  of  interest  upon 
six  million  dollars. 

We  come  now  to  consider  the  question,  whether  there  is 
any  special  reason  why  the  State  should  furnish  any  further 
assistance  to  the  property  ;  the  Committee  being  of  the  opin- 


674864 


4 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


ion  that  the  day  has  gone  by  when  the  credit  of  the  Com¬ 
monwealth  should  be  used  simply  to  assist  any  railroad 
project,  however  meritorious.  But  it  cannot  be  overlooked 
that  the  needed  amounts  can  be  secured  from  any  source  only 
by  the  pledge  or  sale  of  the  company’s  mortgage  bonds,  and 
that  the  present  interests  of  the  Commonwealth  in  the  prop¬ 
erty  are  too  important  to  be  subordinated  to  this  new  mort¬ 
gage  debt,  if  issued  at  prevailing  prices  for  railroad  securities. 
Nor  can  we  forget,  that  if  the  largest  shareholder,  as  well  as 
the  one  best  able,  is  unwilling  to  further  invest  to  protect 
itself,  private  parties  may  well  justify  themselves  in  exacting 
the  best  terms  they  can  make  with  the  company  for  any  ad¬ 
vance  of  the  money. 

This  brings  us  to  consider  the 

POSITION  OF  THE  STATE  IN  REGARD  TO  THE  HOAD. 

The  present  New-York  and  New-England  Railroad  Com¬ 
pany  has  a  capital  stock  of  twenty  millions  of  dollars,  being 
the  aggregate  amount  of  the  Berdell  bonds,  so  called.  By 
the  action  of  the  courts  and  the  legislatures  of  the  various 
States  which  have  any  control  of  the  property,  the  title  to  it 
has  been  secured  by  the  holders  of  the  Berdell  bonds,  organ¬ 
ized  under  tlie  name  of  the  New-York  and  New-England 
Railroad  Company.  By  the  provisions  of  the  mortgage  itself, 
these  bonds  were  to  be  converted  into  stock;  and  those  Only 
who  have  received  stock  in  exchange  for  their  bonds  partici¬ 
pate  in  the  earnings  of  the  property.  Five  million  seven 
hundred  and  thirty-live  thousand  dollars  of  the  bonds  have 
been  converted  into  stock,  and  fourteen  million  two  hundred 
and  sixty-five  thousand  dollars  in  bonds  remain  unconverted; 
and,  of  the  amount  thus  converted  into  stock,  the  State  holds 
three  million  six  hundred  thousand  dollars.  But  the  only 
value  of  the  bonds  still  outstanding  is  in  their  right  to  re¬ 
ceive  stock  for  an  equal  amount  in  the  New-York  and  New- 
England  Railroad  Company. 

The  State,  then,  has  already  an  interest  in  this  railroad,  and 
must  be  considered  as  owning  as  assets  three  million  six 
hundred  thousand  dollars  in  the  stock  of  the  New-York  and 
New-England  Railroad  Company,  together  with  a  note  for 
two  hundred  and  fifty  thousand  dollars,  being  the  amount  of 
a  former  loan  by  the  State  to  said  company.  And  its  liability 


1878.] 


HOUSE  —  No.  276. 


5 


up  to  the  present  time  amounts  to  seven  hundred  and  forty- 
three  thousand  six  hundred  pounds  sterling  in  scrip,  payable 
in  London  in  the  year  nineteen  hundred,  which  scrip  was 
issued  heretofore  by  the  Commonwealth  for  the  benefit  of  the 
Boston,  Hartford,  and  Erie  Railroad  Company.  The  sinking- 
fund  created  for  the  purpose  of  the  payment  of  this  issue  of 
scrip  will  be  sufficient,  with  its  accumulations,  to  pay  the  prin¬ 
cipal  at  maturity :  so  that  the  present  and  future  liability  of 
the  State  on  any  obligations  now  existing  against  it  is  the 
future  interest  on  this  issue,  which  interest  amounts  to  one 
hundred  and  eighty  thousand  dollars  annually. 

The  question  before  this  Committee  is  therefore  simply 
this  :  What  do  the  interests  of  the  State  demand,  considering 
that  it  owns  this  stock  in  the  company,  and  is  liable,  until  the 
year  nineteen  hundred,  for  the  payment  of  this  large  amount 
of  interest  annually?  It  must  be  considered  without  regard 
to  the  past  history  of  the  property,  or  the  mistakes  which 
have  been  made  by  a  former  management.  It  is  too  late  to 
consider  whether  it  was  wise  or  not  for  it  ever  to  have  as¬ 
sumed  these  obligations ;  or  whether,  the  location  of  the  road 
being  in  great  part  beyond  the  boundaries  of  the  Common¬ 
wealth,  it  was  entitled  to  original  assistance.  The  only  ques¬ 
tion  now  to  consider  is,  how  the  State’s  interest  can  be  best 
secured,  and  the  road,  if  possible,  made  valuable,  so  that  the 
State  may  be  under  no  future  liability. 

And  the  Committee  have  considered  this  question  only 
from  the  State’s  point  of  view.  For,  remembering  the  debt 
which  it  has  incurred  in  connection  with  railroad  enterprises, 
the  Committee  would  not  think  it  advisable  for  the  State  to 
render  to  any  new  enterprise  any  assistance  whatever.  If 
this  was  a  question  of  that  sort,  and  the  State  had  not 
already  a  large  amount  of  property  invested  in  it,  the  Com¬ 
mittee  would  have  had  no  hesitation  in  coming  to  the  con¬ 
clusion  that  the  money  of  the  people  should  not  be  appro¬ 
priated  to  the  building  of  railroads,  even  though  they,  to  a 
certain  extent,  may  be  regarded  as  public  corporations.  Upon 
this  point,  however,  the  views  of  this  Committee  are  already 
before  the  legislature. 

The  fact  remains,  however,  that,  if  nothing  is  done,  there 
is  before  the  State,  during  the  next  twenty-two  years,  an 
annual  payment  of  one  hundred  and  eighty  thousand  dollars: 


6 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


so  that  the  State,  before  the  maturity  of  her  scrip,  will  here¬ 
after  be  obliged  to  pay  (including  interest  on  the  expendi¬ 
tures)  the  aggregate  sum  of  seven  million  seventeen  thou¬ 
sand  six  hundred  and  eighty-two  dollars.  This  represents 
what  the  citizens  of  the  State  are  to  be  taxed  for,  and  with¬ 
out  benefit,  if  nothing  is  done.  It  is  therefore  desirable,  if 
it  is  possible,  for  the  State  to  secure  itself  against  the  loss  of 
that  sum,  or  of  any  further  sums,  even  by  the  advance  of 
money  to  further  complete  the  enterprise,  if  necessary ;  pro¬ 
vided  there  can  be  such  assurances  as  shall  render  it  abso¬ 
lutely  certain,  or  as  near  absolutely  certain  as  is  possible, 
that  the  State  shall  be  secured  from  further  loss  on  either  old 
or  new  account.  We  have  considered  this  only  as  a  public 
question,  disregarding  what  the  interests  of  the  company,  or 
other  stockholders,  or  the  public,  as  interested  in  railroad 
communications,  demand,  and  have  endeavored  to  ascertain 
what  economy  and  a  wise  administration  of  the  finances  of 
the  State  require. 

The  question  for  consideration,  then,  is,  What  action  shall 
the  State  take  in  the  premises  ?  Shall  the  stock  be  sold  for 
what  it  will  bring,  and  the  loss  made,  whatever  it  may  be  ? 
or  shall  it  be  held,  trusting  that  time  may  in  some  w7ay 
add  to  its  value  without  any  action  by  the  State  ?  Or  shall 
any,  and,  if  any,  what,  steps  be  taken  by  the  State  to  save 
her  loss  already  made  in  the  payment  of  back  interest,  and 
to  save  her  citizens  the  necessity  of  being  taxed  $180,000 
a  year  for  twenty-two  years  to  come  ? 

To  dispose  of  the  stock  of  the  State  seems  to  us  clearly 
unwise ;  and,  in  this  connection,  it  must  be  borne  in  mind 
that  this  sale  of  stock  by  the  State  would  not  relieve  it  in 
any  respect  from  its  future  interest  liability.  By  no  possi¬ 
bility  could  the  State  then  be  relieved  of  its  burden ;  and, 
until  the  year  nineteen  hundred,  it  would  continually  go  on 
making  payments,  which  would  in  the  aggregate  amount, 
with  the  interest  thereon,  to  over  seven  millions  of  dollars. 
We  cannot  see  how  the  State  could  be  in  any  manner  bene¬ 
fited  by  any  such  course  of  proceeding. 

Another  proposition  which  has  been  suggested  is,  that  the 
State  shall  advance  the  sum  of  four  million  dollars  for  the 
purpose  of  paying  all  the  outstanding  encumbrances  and  debts 
upon  the  road.  Though  this  would  place  the  company  in  a 


1878.] 


HOUSE  — No.  276. 


7 


more  satisfactory  position,  by  clearing  up  the  title  to  all  parts 
of  the  road,  and  giving  to  it  possession  of  a  line  of  track  from 
Boston  and  Providence  to  Waterbury,  we  cannot  recommmend 
it  as  a  wise  solution.  It  is  essential  to  the  prosperity  of  this 
enterprise,  in  the  nature  of  things,  that  it  should  not  only  have 
a  road  free  from  all  encumbrances  and  liens,  but  that  it  should 
have  a  complete  road  to  the  Hudson  River,  so  that  it  may  not 
only  be  a  local  road,  with  the  large  local  traffic  which  it  will 
ha-ve  along  its  line,  but  may  have  all  those  advantages  for 
through  traffic  to  and  beyond  the  State  of  New  York  which 
the  other  western  lines  of  Massachusetts  have.  It  must 
rely  on  a  through  as  well  as  a  local  business  to  enable  it  to 
prove  a  benefit  to  the  community,  and  to  yield  an  income  to 
its  owners.  Nor  would  the  corporation  be  justified  in  assum¬ 
ing  the  payment  of  interest  on  the  old  loans  of  the  State,  in 
addition  to  that  to  be  paid  on  the  four  million^  itself,  as  no 
provision  would  be  made  thereby  for  a  completion  of  the 
road. 

THE  PLAN  PROPOSED. 

The  proposition  which  the  Committee*  deem  most  for  the 
interests  of  the  State  is,  that  the  Commonwealth  shall  ad¬ 
vance  an  amount  not  exceeding  six  million  dollars  upon  the 
security  of  the  mortgage  which  has  been  already  authorized, 
and  upon  the  express  condition  that  this  money  shall  accom¬ 
plish  the  two  great  objects  desired  by  the  company  ;  viz. :  — 

First,  To  pay  this  gross  debt  of  $4,016,690,  to  enable  it  to 
take  possession  of  the  Hartford,  Providence,  and  Fishkill 
Road,  and  the  unfinished  road-bed,  and  possess  the  whole 
property  free  from  debts  and  encumbrances. 

Second,  To  finish  and  equip  the  road  to  some  point  on  the 
Hudson  River,  and  thus  secure  communication  with  the  West 
and  South-West,  and  especially  with  the  coal  and  oil  fields  of 
Pennsylvania.  To  accomplish  this  latter  purpose,  it  is  esti¬ 
mated  that  about  two  million  dollars  will  be  required. 

The  proposition  of  the  company  is,  in  brief,  this  :  To  borrow 
from  the  State  six  million  dollars  of  its  five-per-cent  bonds, 
payable  Jan.  1,  1900 ;  to  pay  to  the  State  the  amount  of 
interest  which  the  State  must  pay  upon  the  same,  and  also 
to  assume  and  pay  the  interest  hereafter  due  from  the  State 
upon  its  former  loan,  —  namely,  $180,000  per  annum,  —  until 
1900,  and  to  secure  the  State  by.  a  first  mortgage  upon 


8 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


all  its  road-bed,  equipment,  and  franchises.  It  also  pro¬ 
poses  that  the  money  shall  be  applied  directly  by  the  agents 
of  the  State,  and  under  its  direction,  to  the  payment  of  the 
debt,  and  the  completion  and  equipment  of  the  road  ;  and 
that  no  moneys  at  all  shall  be  raised  or  expended  until  the 
Governor  and  Council  are  satisfied  that  a  good  title  can  be 
made  to  the  whole  of  the  property,  and  that  the  debt  can  be 
paid,  and  the  road  completed  and  equipped,  for  this  sum. 

The  result  of  this  will  be  a  line  of  railroad  running  from 
Boston  to  the  Hudson  River,  thoroughly  equipped  for  a 
through  traffic,  and  with  as  good,  certainly,  if  not  better, 
facilities  and  connections  for  business,  and  chances  for  profit 
and  for  dividends,  as  any  of  the  through  lines  running 
towards  the  West,  and  free  from  all  encumbrances  what¬ 
ever,  except  a  mortgage  for  ten  millions  of  dollars  in 
bonds,  ever^  one  of  which  bonds  is  to  be  held  as  security 
by  the  State  for  its  proposed  advances  of  the  six  millions 
of  dollars,  and  also  as  security  for  any  future  payments  of 
interest  on  its  old  loan :  in  other  words,  the  State  will  hold, 
without  a  partner,  a  ten-million-dollar  bottom  mortgage  upon 
this  railroad  to  secure  it  against  any  further  liability  what¬ 
ever,  either  by  the  payment  of  interest  or  otherwise,  on  ac¬ 
count  of  this  road,  and  to  insure  that  all  payments  by  the 
State  from  this  time  henceforth  shall  cease ;  and  a  security 
for  the  repayment  of  the  six  million  dollars,  and  interest 
thereon,  as  well  as  for  the  re-payment  of  future  interest  on 
the  past  issue  of  scrip,  is  thus  acquired  by  the  Common¬ 
wealth. 

SECURITY  OF  THE  LOAN. 

The  first  and  most  important  question  which  arises  is, 
Will  the  security  offered  be  sufficient  to  insure  the  safety 
of  the  principal  and  interest  of  the  new  loan?  The  com¬ 
pany  will  be  the  owner,  including  branches,  of  345  miles 
of  railroad  extending  from  the  Hudson  at  the  West  to 
Boston  and  Providence  at  the  East.  The  through  line 
from  Fishkill  to  Boston  will  be  about  226  miles  long ; 
the  through  line  from  Fishkill  to  Providence,  about  200 
miles.  It  connects  ,  at  the  West  directly  with  the  Erie  Rail¬ 
road,  with  its  Western  extensions  and  its  branches,  drawing 
from  the  coal  and  oil  regions  ;  and  makes  near  connection 
with  the  Pennsylvania  Central,  and  with  the  coal  depot  of 


1878.] 


HOUSE  — No.  276. 


9 


the  Delaware  and  Hudson  Canal  Company  at  Rondout.  Prod¬ 
uce  and  coal  starting  from  the  point  of  production  in  cars 
can  be  transported  across  the  Hudson  on  barges,  and  deliv¬ 
ered  to  the  purchaser  in  Massachusetts,  Rhode  Island,  or 
Connecticut,  without  breaking  bulk  from  the  moment  of 
starting.  The  through  business  will  unquestionably  be  very 
large.  On  this  point  we  had  the  testimony  of  Col.  Cannon 
and  Mr.  Roosevelt  of  New  York,  who  are  gentlemen  of  high 
standing,  and  well  qualified,  from  their  position  with  regard 
to  the  Erie  and  the  Delaware  and  Hudson  Canal  Company, 
to  judge  of  the  value  of  the  Western  connection.  In  the  one 
item  of  coal  the  business  would  probably  be  very  large.  It 
is  true  that  the  road  could  not  compete  with  water  transpor¬ 
tation  at  Boston,  Providence,  or  Hartford ;  but  the  cost  and 
waste  of  handling,  the  expense  of  insurance,  and  the  cost  of 
a  short  haul  by  rail,  are  so  great,  that  it  is  confidently  believed 
that  coal  can  be  delivered  at  any  point  twenty-five  miles  from 
these  cities  by  railroad  cheaper  than  by  water,  and  thence  by 
rail.  The  Connecticut  Western  Railroad,  with  the  disadvan¬ 
tages  of  its  high  grades  and  sharp  curves,  which  necessitates 
the  use  of  a  second  “helping  ”  engine  on  a  part  of  its  route, 
has  delivered  coal  in  considerable  quantities  at  Rockville,  a 
point  east  of  Hartford,  in  competition  with  water  transpor¬ 
tation  to  Hartford  ;  and  the  easier  grades  and  curves  of  this 
road  would  enable  it  to  carry  much  heavier  trains  with  the 
same  power,  and  consequently  at  less  cost  per  ton.  But, 
whether  the  expectations  of  the  managers  as  to  the  coal  trade 
east  of  Hartford  are  fully  realized  or  not,  it  is  evident,  that, 
west  of  Hartford,  there  will  be  a  large  business  in  this  product ; 
and  the  transportation  of  oil,  grain,  and  other  Western  and 
South-western  products,  it  is  believed,  will  be  very  great. 
These  come  from  other  sources  in  large  quantities  now  over  the 
Boston  and  Albany  Railroad,  and  are  carried  at  a  profit. 
Mr.  Appleton,  the  former  chairman  of  the  Railroad  Commis¬ 
sioners  of  Massachusetts,  in  a  report  of  1865,  says,  — 

“  The  other  line  from  Boston  to  the  Hudson  River,  the 
Worcester  and  Western,  reports,  upon  the  Worcester,  curves 
of  600  feet  radius,  and,  upon  the  Western,  curves  of  882 
feet  radius,  and  grades  upon  the  Western  of  88  feet  per  mile 
westward,  and  75  J  feet  per  mile  eastward. 

“  The  controlling  grade  of  traffic  upon  the  Boston  and 


10 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


Albany  line  is  75i  feet  per  mile ;  upon  the  Boston,  Hartford, 
and  Erie,  it  is  60|  feet  per  mile,  allowing  an  increase  of  load 
to  the  same  motive  power  of  nearly  twenty-five  per  cent.  The 
summit  overcome  by  the  Boston  and  Albany  line  on  the 
Green-Mountain  range  is  1,450  feet  above  tide-water ;  while 
the  highest  summit  passed  over  by  this  line  is,  in  the  range 
between  the  Harlem  Railroad  and  the  Hudson  River,  only 
753  feet  above  the  tide  at  Fishkill.” 

On  the  line  from  Waterbury  graded  since  that  report,  the 
grades  going  West  have  been  allowed  to  reach  eighty  feet  per 
mile ;  while,  coming  East,  they  have  been  kept  within  Mr. 
Appleton’s  statement. 

We  have,  therefore,  going  West,  a  grade  upon  the  New- 
York  and  New-England  of  80  feet  against  the  Boston  and 
Albany  grade  of  83  feet,  and  going  East,  in  the  line  of  the 
chief  traffic,  a  grade  of  60f  feet  upon  the  New-York  and 
New-England,  against  a  grade  of  75i  upon  the  Boston  and 
Albany.  With  its  connections  with  the  W est  and  South-W est, 
and  its  grade  facility  for  transportation,  it  is  difficult  to  see 
why  this  line  may  not  at  no  very  distant  day  make  as  good  a 
record  for  itself  in  through  trade  as  the  Boston  and  Albany. 
It  is  true,  it  will  have  no  bridge  across  the  Hudson  ;  but  the 
Boston  and  Albany  had  none  long  after  its  through  trade 
had  become  well  developed:  and  a  glance  at  the  map  shows 
how  easily  from  Hopewell  Junction  a  connection  may  be 
effected  with  the  bridge  already  in  progress  of  construction 
at  Poughkeepsie,  or  the  projected  bridge  at  Peekskill ;  while 
from  Brewster,  running  over  or  parallel  with  the  Harlem  Road 
to  Bedford  Station,  it  is  less  than  ten  miles  to  Croton  Point, 
but  a  few  miles  south  of  which  is  the  northern  terminus  of  a 
railroad  making  direct  connection  with  the  Pennsylvania 
Central.  The  immediate  connection  at  Fishkill,  and  the 
prospective  ones  at  Croton  Point,  Peekskill,  and  Poughkeep¬ 
sie,  certainly  hold  out  promises  for  the  future  which  need  be 
realized  in  but  part  to  make  this  road  extremely  valuable  as 
a  road  of  through  traffic. 

It  is  very  certain  that  if  other  railroads,  or  combinations  of 
railroads,  which  run  from  Boston  to  the  Hudson  River,  can 
ucceed,  this  road  can  succeed.  We  do  not  enter  into  the 
discussion  here  of  the  question,  whether  by  its  connection 
with  the  Erie  and  Pennsylvania  Railroads,  and  especially 


1878.] 


HOUSE  — No.  276. 


11 


with  the  coal-fields,  this  road  will  have  peculiar  advantages 
in  the  way  of  through  traffic..  It  is  enough  to  say,  that  this 
road,  with  a  through  rail  to  the  Hudson  River,  will  have  as 
good  a  chance  of  success  as  other  railroads,  and  that  if  others 
can  succeed,  and  pay  interest  and  dividends,  with  a  capital 
stock  and  debt  of  thirty  million  dollars,  this  road,  at  a  cost  of 
six  millions,  can  certainly  be  a  profitable  road  for  its  owner 
at  that  price,  and  in  any  competition  can  always  earn  money 
where  other  lines  can  live.  This  reasoning  is  on  the  assump¬ 
tion  that  the  State,  by  being  obliged  to  take  this  road  at  a 
valuation  of  six  millions,  or  even  ten  millions,  could  not  fail 
of  making  a  good  investment,  and  one  which  would  in  any 
event  be  profitable,  and  secure  it  against  any  loss  on  account 
of  the  advance  proposed  by  the  bill  which  the  Committee 
report.  In  fact,  even  in  its  present  incomplete  condition, 
and  with  all  the  disadvantages  under  which  it  is  laboring,  the 
net  earnings  of  the  road  for  the  year  ending  Sept.  80, 
1877,  amounted  to  more  than  four  hundred  thousand  dollars  ; 
and  it  cannot  be  doubted,  that,  upon  the  completion  of  the 
road,  it  can  not  only  earn  a  large  additional  income,  but  there 
is  no  reason  why  immediately  thereafter  its  income  should 
not  be  as  large  as  the  majority  of  the  other  through  routes  to 
New  York. 

Thus,  so  far  as  the  earning  ability  is  concerned,  it  seems  to 
the  Committee  that  there  are  sufficient  assurances  that  an 
income  will  be  earned  by  the  road  sufficient  to  relieve  the 
State  of  all  future  liability ;  and  that,  in  any  event,  the  pro¬ 
posed  security  is  ample. 

It  is  very  difficult  to  estimate  the  value  of  a  railroad,  inde¬ 
pendent  of  its  income  earning  power ;  but,  according  to  the 
Report  of  the  Railroad  Commissioners  (in  House  Document, 
No.  825,  of  1877),  they  estimate  the  value  of  the  completed 
property  of  the  New-York  and  New-England  Railroad  Com¬ 
pany  (including  the  Hartford,  Providence,  and  Fish  kill, 
and  the  road,  when  completed,  west  of  Waterbury)  at 
$12,695,475 :  so  that  upon  this  valuation,  which  is  an 
entirely  conservative  one,  the  Commonwealth  would  hold 
as  security  more  than  double  the  amount  of  its  contem¬ 
plated  advance.  All  that  the  railroad  will  have  to  earn  in 
order  to  hold  the  State  harmless  is  four  hundred  and  eighty 
thousand  dollars  a  year ;  namely,  five-per-cent  interest  on 


12  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


the  proposed  new  loan  of  six  millions  (which  interest  amounts 
to  three  hundred  thousand  dollars),  and  the  amount  now  paid 
out  annually  by  the  State  as  interest,  viz.,  —  one  hundred  and 
eighty  thousand  dollars ;  and  to  pay  this  amount  will  only 
require,  over  the  net  earnings  of  the  last  fiscal  year,  an  in¬ 
crease  of  about  one  hundred  thousand  dollars  per  annum. 

It  may  be  proper  here,  in  considering  the  prospective  earn¬ 
ings  of  the  road  when  completed,  to  examine  the  net  earnings 
of  existing  completed  roads,  as  shown  by  the  Reports  of  the 
Railroad  Commissioners  of  Massachusetts  and  Connecticut. 
From  the  Massachusetts  Report  for  the  year  1877,  page  248,  it 
appears  that  the  average  net  earnings  per  mile  of  road  operated 
by  seventeen  railroads  of  Massachusetts  amounted  to  $3,625  ; 
and  by  the  Connecticut  Report  for  the  year  1877,  page  85,  it 
appears  that  the  average  net  earnings  per  mile  operated  of 
the  twenty-four  roads  of  Connecticut  amounted  to  $3,477 
per  mile.  The  New-York  and  New-England  Railroad,  when 
completed,  will  be  three  hundred  and  forty-five  miles  long ; 
and,  if  it  should  earn  the  average  per  mile  of  the  roads  of 
Massachusetts,  its  net  earnings  would  amount  to  $1,250,625 
per  year  ;  and,  if  it  should  earn  the  average  per  mile  of  the 
roads  in  Connecticut,  its  net  earnings  per  year  would  amount 
to  $1,199,565.  It  will  not  require  one-half  of  either  of  these 
amounts  to  meet  all  the  obligations  of  the  company  to  the 
State. 

OBJECTIONS  CONSIDERED. 

It  was  objected,  however,  by  the  majority  of  the  Committee 
of  last  year,  when  before  us,  that  the  earnings  of  the  New- 
York  and  New-England  were  simply  nominal,  and  not  real. 
No  such  objection  was  taken  to  the  statement  of  the  Hart¬ 
ford,  Providence,  and  Fishkill ;  but  it  was  said  that  all  the 
earnings  of  the  New-York  and  New-England  had  been  and 
would  be  needed  to  be  applied  to  its  daily  wants,  and  were 
not  earnings  which  could  be  used  to  pay  interest.  The  an¬ 
swer  to  this  is  threefold :  — 

First ,  The  proposed  outlay,  if  the  estimates  are  reliable,  — 
and  we  see  no  reason  to  believe  them  otherwise,  —  would  add 
at  once  what  might  be  needed  to  render  further  outlay  unne¬ 
cessary,  unless  business  increased  very  largely ;  and,  if  it  did 
increase,  the  profits  upon  the  increase  would  supply  the 
money  needed  for  the  additional  facilities  it  demanded. 


1878.] 


HOUSE  — No.  276. 


18 


Second,  The  profits  will,  in  our  judgment,  so  much  exceed 
the  $480,000,  that  the  surplus  over  this  will  be  more  than  is 
needed  for  this  purpose. 

Third ,  The  use  of  this  surplus  was  clearly  explained  by 
the  manager  of  the  road. 


1.  Interest  .  . 

2.  Money  paid  to  pay  off  encumbrances 

3.  Reduction  of  floating  debt  . 

This  was  clearly  surplus . 

4.  Profit  and  loss.  This  was  a  sum  taken  from 

the  profits  of  the  year,  and  applied  to  make 
good  an  account  of  $30,000  which  had 
stood  upon  the  books  for  several  years,  and 
was  now  deemed  uncollectable,  and  to  pay 
off  the  expenses  of  old  litigation  ($3,375.- 
61),  which  was  really  an  old  debt 


$68,486.16 

28,881.23 

10,571.56 


$107,938.95 


33,375.61 


$141,314.56 

There  was  an  expenditure  for  double  track 
and  improvements  at  Franklin,  needed  to 
make  connections  there,  which  was  an  extraor¬ 
dinary  expenditure,  and  not  likely  to  occur 
elsewhere  or  again,  of . 33,718.76 

$175,044.76 


The  only  expenditure  which  could  possibly  be  criticised, 
as  one  likely  to  occur  again,  is  that  of  $9,000  for  new  cars, 
which  increased  the  direct  value  of  equipment.  All  expen¬ 
ditures  for  road-bed,  bridges,  and  repairs,  were  charged  to 
operating  expenses,  and  are  not  a  portion  of  the  surplus. 

One  mode  of  estimating  the  prospects  of  this  road  is 
by  comparing  the  population  and  valuations  of  the  cities  and 
towns  on  its  line  with  those  on  the  line  of  the  very  success¬ 
ful  Boston  and  Albany  Railroad,  by  which  it  appears  that 
the  population  on  the  line  of  the  New-York  and  New-Eng- 
land  Road  is  nearly  eight  per  cent  larger  than  that  on  the 
Boston  and  Albany  Road,  giving  the  Boston  and  Albany  Road 
the  benefit  of  the  large  city  of  Albany  at  its  western  termi¬ 
nus.  And  the  valuation  of  the  property  on  the  New-York 
and  New-England  Railroad  is  more  than  twelve  per  cent 


14  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


greater  than  that  on  the  Boston  and  Albany  Road :  so  that 
both  population  and  valuation  on  the  line  of  the  New-York 
and  New-England  Railroad  justifies  us  in  expecting  excep¬ 
tionally  favorable  results,  whether  we  consider  the  question 
of  its  probable  success  from  the  point  of  view  of  its  local 
business,  or  of  its  through  business,  when  finished.  When 
the  road  constitutes  a  continuous  line,  under  one  manage¬ 
ment,  from  Boston  to  the  Hudson  River,  and  is  brought  into 
close  connection  with  the  Erie  and  Pennsylvania  Railroads, 
can  bring  coal  without  transshipment  from  the  mines  of  Penn¬ 
sylvania  to  Southern  New  England,  and  can  bring  wheat  and 
all  the  products  of  the  West  and  South-West  directly,  and 
without  breaking  bulk,  to  all  points  on  the  line  of  this  road 
and  its  connections,  and  to  Boston  and  Providence  and 
Worcester,  it  seems  impossible,  that  under  any  contin¬ 
gency,  or  in  any  prostration  of  business  or  of  commercial 
interests,  this  road  can  fail,  unless,  indeed,  all  railroad  enter¬ 
prises,  no  matter  how  small  the  capital,  or  how  large  the 
business,  are  to  be  unsuccessful. 

CONCLUSIONS. 

Believing  that  the  loan  desired  is  practically  safe,  and  that 
thereby  the  State  may  reasonably  hope  to  protect  itself 
against  loss  in  the  future,  save  the  annual  tax  of  $180,000  for 
the  next  twenty-two  years,  and  secure  a  market  for  the  nine 
hundred  acres  of  flats  owned  by  the  State  at  South  Boston, 
we  feel  it  our  duty  to  recommend  the  loan  asked  for.  We 
do  this  wholly  and  entirely  in  the  interest  of  the  State,  and 
with  no  other  object  than  to  save  the  money  of  its  people. 
We  deem  it  as  legitimate  for  the  State  to  protect  its  own 
interests  as  for  an  individual,  and  that  it  is  our  duty  to 
recommend  such  a  course  as  will  enable  it  so  to  do. 

The  Committee,  however,  regard  it  as  of  the  utmost  im¬ 
portance  that  the  State  should  continue  to  have  the  practical 
control  of  the  management  of  the  property.  In  the  bill 
reported  herewith  we  have  provided  for  a  board  of  three 
supervisors,  to  be  appointed  by  the  Governor  and  Council, 
who  are  to  have  the  control  of  all  expenditures  made  for  the 
benefit  of  the  New-York  and  New-England  Railroad.  We 
have  provided  that  the  treasurer  of  the  Commonwealth  shall 
retain  all  securities,  and  the  proceeds  from  all  scrip  sold, 
until  disbursed  upon  the  warrant  of  the  Governor,  approved 


1878.] 


HOUSE  — No.  276. 


15 


by  the  board  of  supervisors,  and  paid  directly  by  the  treas¬ 
urer  of  the  Commonwealth  to  the  parties  holding  either 
underlying  liens  or  claims,  or  doing  work  under  contract  for 
the  completion  of  the  road. 

We  have  provided  a  means  by  which  the  Commonwealth 
may  hold  as  security  every  bond  authorized  to  be  issued  by 
the  New-York  and  New-England  Railroad  Company,  and 
that  the  security  shall  be  held  not  only  for  the  payment  of 
all  future  interest,  whether  upon  the  old  loan  or  the  new, 
but  also  for  the  fulfilment  of  an  agreement  to  be  made 
between  the  corporation  and  the  Commonwealth,  by  which 
the  supervisors  shall  have  absolute  veto  power  upon  all 
actions  of  the  directors,  and  the  right  to  attend  all  meetings 
of  the  board.  Thus  we  have  not  neglected  the  fact,  that 
although  the  direction  of  the  property  is  now  absolutely  in 
the  hands  of  the  State,  inasmuch  as  it  has  always  held  a 
majority  of  the  stock,  it  may  not  always  remain  so,  but  have 
looked  forward  to  the  time  when  the  stock  shall  become 
dividend-paying,  and,  the  conversion  of  other  bonds  follow¬ 
ing  as  a  matter  of  course,  the  State  might  lose  its  control. 
But  especially  have  we  guarded  the  interests  of  the  Com¬ 
monwealth  by  referring  the  whole  matter  to  a  final  revision 
by  the  Governor  and  Council,  under  a  clause  providing,  that, 
before  any  scrip  shall  be  issued,  it  shall  appear  to  the  satis¬ 
faction  of  the  Governor  and  Council  that  a  completed  road, 
and  one  free  from  all  other  debt  than  that  held  by  the  State, 
shall  be  made  absolutely  sure  and  certain. 

To  sum  up,  the  bill  will,  as  security  for  the  protection  of 
the  Commonwealth’s  interests,  give,  — 

First,  A  guaranty  that  the  road  shall  be  fully  completed. 

Second ,  A  guaranty  that  it  shall  be  freed  from  all  encum¬ 
brances. 

Third,  A  bottom  mortgage  of  ten  million  dollars  on  the 
road  thus  fully  completed,  and  otherwise  unencumbered,  to 
secure  the  State  against  loss  on  a  loan  of  only  six  millions. 

Fourth,  A  control  of  the  road,  in  the  interests  of  the  State, 
by  agents  of  the  State,  having  a  full  supervisory  control  of 
the  action  of  the  directors. 

Fifth,  A  guaranty  that  none  of  the  appropriations  shall  be 
expended,  unless  it  shall  appear  to  the  satisfaction  (1)  of  the 
Governor  and  Council  and  (2)  of  the  supervisors  that  all  the 
above  objects  will  be  accomplished. 


16  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


Sympathizing  fully  with  the  general  disinclination  which 
exists  in  the  minds  of  the  legislature  and  of  the  community 
to  engage  in  any  railroad  enterprise,  we  have,  nevertheless, 
become  convinced,  by  long  and  careful  investigation  of  the 
matter  before  us,  that,  as  a  financial  question,  the  interests 
of  the  State  will  be  best  subserved  by  the  passage  of  the  bill 
herewith  submitted. 

The  Committee  therefore  report  the  accompanying  Bill. 

ALBERT  PALMER, 

Of  the  Senate. 

NATHAN  M.  HAWKES, 
NAHUM  CHAPIN, 

HENRY  H.  WILDER, 
FREDERICK  P.  MOSELEY, 
PAYSON  E.  TUCKER, 

Of  the  House . 

I  concur,  in  the  main,  in  the  foregoing  Report,  particularly 
in  the  statement  of  the  policy  which  denies  State  aid  to  new 
railroad  enterprises.  A  plan  has  been  suggested  of  a  consoli¬ 
dation  between  the  Boston  and  Providence  Railroad  and  the 
New-York  and  New-England  Railroad,  the  interests  of  these 
railroads  being  to  a  certain  extent  identical.  This,  in  my 
opinion,  is  the  true  solution  of  the  question  ;  because  the 
entirely  unnecessary  expense  of  double  terminal  facilities  and 
a  double  staff  of  officials  could  thereby  be  avoided,  and  both 
lines  be  brought  under  one  management.  Should  such  a 
strong  corporation  be  formed,  it  would  be  able  to  raise  the 
requisite  amount  of  money  for  the  completion  of  the  line 
without  recourse  to  the  State  treasury.  This  scheme  is  not, 
under  present  circumstances,  practicable.  The  bill  of  the 
Committee  has  for  its  sole  purpose  and  object  the  relief  of  the 
tax-payers  of  the  State  from  further  payments  on  account  of 
the  last-named  railroad.  The  Governor  and  Council  must  be 
satisfied  that  it  will  accomplish  that  purpose  before  any  ex¬ 
penditure  is  made  under  its  provisions.  I  have  confidence 
enough  in  the  success  of  the  proposed  plan  to  put  the  power 
to  act  in  the  hands  of  the  Governor  and  Council.  In  view, 
therefore,  of  the  end  sought  to  be  attained  by  this  bill,  and 
of  the  safeguards  embodied  in  it,  I  propose  to  give  it  my 
support. 


CHARLES  S.  OSGOOD. 


1878.] 


HOUSE  — No.  276. 


17 


€ommonrocaltl)  of  iitassadjusctts. 


DISSENTING  REPOET. 


The  subject  presented  for  the  consideration  of  this  Com¬ 
mittee  is  concisely  stated  in  the  language  of  the  order  of  the 
last  legislature  ;  viz.,  “  What  action  it  may  be  expedient  for 
the  State  to  take  in  relation  to  its  investments  in  the  stock 
and  securities  of  the  New-York  and  New-England  Railroad.” 

In  order  to  an  intelligent  discussion  of  this  question,  it  is 
necessary  to  understand  exactly  what  those  investments  are, 
and  how  they  now  stand.  In  1867  the  State  borrowed  money 
on  its  own  scrip,  and  loaned  the  same  to  the  railroad,  to  the 
amount  of  thirty-six  hundred  thousand  dollars,  taking  bonds 
of  the  Berdell  mortgage,  so  called,  to  an  equal  amount  as 
security.  In  1870  the  railroad  failed,  and  the  bondholders 
took  possession  of  the  road,  and  organized  the  present  corpo¬ 
ration.  The  Berdell  bonds  issued  and  outstanding  amounted 
to  twenty  million  dollars,  and,  under  the  terms  of  the  mort¬ 
gage,  were  convertible  at  the  pleasure  of  the  holder  into  an 
equal  amount  of  stock.  Only  about  six  millions  has  as  yet 
been  converted  by  the  holders  into  stock,  leaving  about  four¬ 
teen  million  dollars  in  Berdell  bonds  yet  outstanding,  the 
holders  of  which  are  entitled  at  any  time  to  come  in  and  take 
stock  instead.  The  State  has  converted  its  bonds  into  stock, 
and  therefore  holds  thirty-six  hundred  thousand  dollars  of  the 
stock  of  the  road.  At  present  this  is  a  majority  of  the  stock, 
and  the  State  controls  the  management  of  the  road  ;  but 
there  is  nothing  to  prevent  the  rest  of  the  Berdell  bond¬ 
holders  at  any  time  from  taking  the  stock  to  which  they  are 


18  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


entitled.  When  this  is  done,  the  State  will  own  only  about 
three-twentieths  of  the  stock,  —  far  too  small  a  proportion  for 
any  effective  control  of  the  policy  of  the  road. 

The  stock  has  never  been  productive,  and  is  not  likely  to 
be  at  present.  The  State  therefore  has  to  pay  the  interest 
on  the  money  it  borrrowed  to  invest  in  the  Berdell  bonds, 
and  receives  nothing  in  return  from  the  stock  which  those 
bonds  represent.  This  interest  is  a  hundred  and  eighty 
thousand  dollars  annually.  The  principal  of  the  loan  was, 
at  the  time  of  its  creation,  provided  for  by  a  sinking  fund, 
which,  without  doubt,  will  be  sufficient  to  meet  the  principal 
when  it  becomes  due.  The  condition  of  the  State  with 
reference  to  this  investment,  therefore,  is  briefly  this:  It 
must  pay  a  hundred  and  eighty  thousand  dollars  a  year 
until  the  year  1900,  having  to  reimburse  itself  nothing  but 
the  remote  expectancy  of  dividends  upon  its  stock. 

The  practical  question  that  addresses  itself  to  the 
legislature  is,  Can  any  thing  be  done  to  stop  this  annual 
drain  upon  the  treasury  ?  Any  proposition  looking  in  this 
direction  deserves  the  most  careful  consideration ;  and  it  was 
to  a  scheme  to  accomplish  this  end  that  the  attention  of  this 
Committee,  as  well  as  of  the  Special  Committee  of  the  last 
legislature,  was  drawn. 

The  railroad  corporation  made  a  proposition  to  that  Com¬ 
mittee,  and  renewed  it  before  us,  which,  if  accepted  by  the 
State  and  carried  out  by  the  railroad,  would  entirely  relieve 
the  State  of  this  annual  interest-charge.  This  proposition 
may  be  found  in  full  in  House  Document,  No.  2  (1878),  pages 
three,  four,  five,  and  six.  The  gist  of  the  proposition  is,  that 
the  State  shall  borrow  six  million  dollars  upon  its  own  scrip, 
lend  the  money  to  the  railroad,  and  receive  the  obligation 
of  the  railroad  to  pay  not  only  the  principal  and  interest  of 
this  loan,  but  also  the  hundred  and  eighty  thousand  dol¬ 
lars  already  spoken  of,  all  secured  by  a  first  mortgage  on  the 
whole  road. 

About  four  million  dollars  of  the  money  borrowed  is  to 
be  expended  in  paying  the  debts  of  the  company,  and  the 
balance  in  completing  the  road  to  the  Hudson  River ;  and  it 
is  hoped  that  the  result  will  be  that  the  stock  may  thus  be 
eventually  made  more  valuable,  if  not  productive. 

The  State  can  borrow  money  for  five  per  cent.  On  six 


1878.] 


HOUSE  —  No.  276. 


19 


million  dollars  tliis  would  be  three  hundred  thousand  dol¬ 
lars  annually;  which,  with  the  hundred  and  eighty  thou¬ 
sand  dollars,  would  make  the  amount  of  the  railroad’s  annual 
obligation  four  hundred  and  eighty  thousand  dollars,  or  eight 
per  cent  on  the  amount  borrowed  of  the  State.  In  other 
words,  the  State  borrows  six  million  dollars  at  five  per  cent, 
and  lends  it  to  the  railroad  at  eight  per  cent ;  and  the  profit 
of  the  transaction  covers  the  amount  of  the  present  annual 
loss  by  the  State. 

Nothing  can  be  simpler  in  theory.  The  proposition,  if 
carried  out,  would  undoubtedly  meet  the  difficulty.  The 
questions  which  suggest  themselves,  however,  are,  first,  Is  the 
security  good?  and,  second,  Is  it  expedient  as  a  matter  of  pub¬ 
lic  policy  for  the  State  to  go  into  the  transaction?  These 
questions  are  largely  independent  of  each  other  in  their  na¬ 
ture  ;  and  either,  answered  in  the  negative,  should  be  con¬ 
clusive  against  the  acceptance  of  the  proposition. 

As  to  the  security  of  the  proposed  new  loan,  and  the 
ability  of  the  road  to  perform  its  obligation,  it  is  impossible 
to  speak'  with  certainty,  except  to  say  that  the  present 
earnings  of  the  road  are  not  sufficient,  by  considerable, 
to  meet  the  four  hundred  and  eighty  thousand  dollars. 
The  surplus  of  receipts  of  the  whole  road  over  the  regular 
operating  expenses,  which  is  the  most  favorable  way  of 
reckoning  for  the  railroad,  amounted  last  year  to  about 
four  hundred  thousand  dollars,  —  not  nearly  enough  to  meet 
the  proposed  annual  obligation.  Even  this  balance  was  all 
expended  on  account  of  the  road.  Part  of  it  went  to  pay 
interest  and  reduce  the  debt,  and  the  rest  in  various  per¬ 
manent  improvements  in  the  road  and  its  equipment.  If 
this  loan  is  effected,  there  will  be  no  other  interest  to  pay; 
and  the  management  claims  that  there  will  not  be  that  neces¬ 
sity  for  expenditures  on  the  road  in  the  future  that  there  has 
been  in  the  past :  so  that  the  whole  surplus  will  be  available 
towards  the  four  hundred  and  eighty  thousand  dollars  re¬ 
quired  to  be  paid  the  State.  But,  as  already  suggested,  the 
whole  of  the  present  net  income,  taking  it  in  the  most  favor¬ 
able  way  for  the  road,  is  not  enough  to  pay  the  interest  on 
the  proposed  loan.  Whether  it  will  be  or  not,  is  wholly  a 
matter  of  speculation. 

The  corporation  claim,  that,  when  they  have  a  through 


20  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


line  to  the  Hudson  River  brought  all  under  one  management, 
the  increase  in  their  net  income  will  be  far  more  than  enough 
to  meet  the  interest  which  they  will  have  to  pay  the  State. 
On  the  other  hand,  there  are  many  men,  whose  judgment  is 
not  lightly  to  be  rejected,  who  assert  that  the  road  from 
Waterbury  to  Fishkill  will  not  be  profitable,  that  it  will  open 
no  through  connection  of  any  value  as  compared  with  the 
existing  lines,  and  that  the  local  business  on  that  part  of  the 
road  will  be  of  no  value.  The  whole  matter  was  very  thor¬ 
oughly  investigated  in  1870  by  the  Committee  on  Railroads 
of  that  year,  and  the  opinions  of  railroad  experts  differed 
widely  in  the  matter.  This  Committee  has  investigated 
the  matter  as  thoroughly  as  possible ;  and,  with  the  informa¬ 
tion  possible  to  obtain,  we  are  inclined  to  the  opinion,  that 
with  judicious  management,  such  as  the  road  now  has,  the 
earnings  will  be  likely  to  be  more  than  sufficient  to  meet 
the  interest  which  the  road  will  have  to  pay  the  State.  In 
other  words,  for  a  loan  of  six  million  dollars,  even  at  eight 
per  cent,  the  road  completed  to  the  Hudson  River,  and  well 
and  honestly  managed,  might  probably  be  a  sufficient  secu- 
rity. 

But  there  are  some  considerations  of  a  general  nature 
which  cannot  be  overlooked  in  deciding  upon  the  security  of 
this  loan. 

First ,  The  success  and  value  of  a  railroad  depend  very 
largely  upon  the  honesty  and  ability  of  its  management. 
Experience  here  and  elsewhere  has  shown  that  in  no  de¬ 
partment  of  business  are  skill  and  shrewdness  more  vitally 
necessary  than  in  the  management  of  a  railroad,  or  where  it 
is  more  difficult  to  guard  against  corruption  and  dishonest}'. 
The  present  management  is  undoubtedly  able  and  upright ; 
but  they  hold  their  offices  by  a  very  uncertain  tenure,  and 
the  Berdell  bondholders  can  at  any  time  dispossess  them. 
The  interest  of  the  Commonwealth  is  not  large  enough  to 
control  the  management.  There  was  a  provision,  it  is  true, 
in  the  bill  submitted  to  the  Committee,  for  a  Board  of  Super¬ 
vision,  which  should  exercise  a  veto  upon  the  action  of  the 
Directors.  Admitting  that  such  a  Board  could  be  created, 
without  concurrent  legislation  of  all  four  of  the  States  in 
which  the  road  is  situated,  —  which  is  not  at  all  clear,  —  it  can 
easily  be  seen,  by  any  one  at  all  conversant  with  railroad  mat- 


1878.] 


HOUSE  — No.  276. 


21 


ters,  that  such  a  provision  falls  far  short  of  an  effectual  check 
upon  fraud  or  mismanagement. 

Secondly ,  Nearly  three-fourths  of  the  line  of  the  road  is 
wholly  outside  the  limits  of  the  State.  The  aid  of  the  State 
has  never  been  granted  to  a  road,  any  considerable  portion  of 
which  is  without  the  State,  with  the  exception  of  this  road 
and  one  other,  —  the  Norwich  and  Worcester  Railroad.  To 
place  the  interests  of  the  State  so  largely  within  the  control 
of  other  States  is  not  good  policy,  and  may  be  very  unsafe. 
Especially  would  this  be  the  case  if  by  any  contingency  the 
mortgage  should  be  foreclosed.  The  possibility  of  the  State’s 
being  obliged  to  operate  a  railroad  running  through  three 
other  States,  is,  to  say  the  least,  not  pleasant  to  contemplate. 

Thirdly ,  The  proposition  of  the  company  does  not  provide 
for  a  sinking  fund  for  the  repayment  of  the  loan.  It  has 
been  the  wise  and  uniform  policy  of  the  State  to  require 
such  a  security  in  nearly  every  loan  which  it  has  made ;  and 
it  is  a  matter  of  very  serious  question,  whether  that  policy 
should  be  abandoned  even  in  a  single  case. 

Fourthly,  There  is  another  consideration,  which,  though 
perhaps  not  affecting  security  of  the  loan,  yet  is  a  matter  of 
much  importance  in  this  connection.  The  managers  are 
confident  that  six  million  dollars  will  be  all  that  is  needed  to 
put  the  road  in  good  running  order  throughout  its  whole 
length.  They  may  be  correct ;  but  the  uniform  experience 
of  the  State  is,  that,  when  it  gets  involved  with  a  railroad 
enterprise,  it  is  obliged  to  spend  much  more  money  than  the 
original  design.  The  Western  Railroad  started  with  a  State 
loan  of  a  million  dollars ;  but,  in  two  years,  it  came  after 
two  million  dollars  more,  which  it  received.  The  very 
next  year  it  applied  for,  and  received,  a  million  dollars  addi¬ 
tional  ;  and  finally,  two  years  after  the  last-named  loan,  the 
State  was  obliged  to  put  in  seven  hundred  thousand  dollars 
to  complete  the  road.  The  Hoosac  Tunnel  is  even  a  more 
striking  illustration.  In  1854  a  loan  of  two  million  dollars 
was  made  to  build  the  tunnel,  on  the  representation  of  very 
able  and  estimable  men,  that,  with  so  much  assistance  from 
the  State,  the  project  was  entirely  feasible.  Twenty-five 
years  have  elapsed,  fifteen  million  dollars  have  been  spent, 
and  the  State  is  not  yet  done  with  the  business.  With  such 
conspicuous  examples  before  them,  your  Committee  are  slow 


22  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


to  believe  that  the  present  loan  may  not  be  the  entering 
wfedge  to  an  expenditure  by  the  State,  which,  if  asked  for  in 
one  sum,  would  be  at  once  refused.  It  is  much  easier  to 
refuse  this  loan  than  it  will  be  to  stand  aloof  when  the  State 
has  become  as  thoroughly  identified  with  the  interests  of  the 
road  as  the  sum  now  asked  for  will  necessitate. 

But,  without  assuming  to  decide  upon  the  security  of  the 
loan,  the  undersigned  are  of  opinion  that  the  controlling 
considerations  in  the  case  are  those  of  public  policy.  It  is 
very  doubtful  if  the  taxing  of  the  people  or  the  loan¬ 
ing  of  their  credit  for  the  furtherance  of  any  private  enter¬ 
prise  is  one  of  the  proper  functions  of  government ;  but,  as 
the  State  has  heretofore  assisted  not  only  this  but  several 
other  railroad  enterprises,  it  is  worth  while  to  examine  briefly 
the  reasons  which  have  led  to  such  a  policy,  and  see  if  they 
apply  here.  The  first  assistance  to  a  railroad  was  in  the 
year  1836.  In  that  year  the  State  subscribed  for  one  million 
dollars  of  the  stock  of  the  Western  Railroad ;  and,  in  subse¬ 
quent  years,  further  loaned  the  road  in  all  about  four  million 
dollars  more.  In  an  exhaustive  report  written  by  the  late 
Gov.  Emory  Washburn,  recommending  the  loan,  the  legis¬ 
lative  Committee  expressly  based  their  action  upon  the 
paramount  importance  of  the  road  in  a  commercial  point 
of  view  to  the  State.  The  Committee,  in  that  report, 
say,  that  “  such  is  the  progress  of  improvement  at  the  present 
day,  that  Massachusetts  cannot  afford  to  be  without  this  work. 
Its  accomplishment  is  identified  with  her  present  well-being 
and  future  progress  and  prosperity.”  They  expressly  re¬ 
frained  from  making  the  measure  a  financial  one ;  for  they 
stated  that  it,,  is  “obvious  that  the  work  has  a  greater 
reference  to  the  public  good  than  the.  emolument  of  its  private 
stockholders.” 

Other  railroads  received  the  aid  of  the  State,  during  the 
years  from  1836  to  1840,  upon  the  same  grounds  of  public 
policy.  The  object  had  in  view  by  the  State  was  constantly 
expressed  to  be  the  promotion  of  its  commercial  prosperity 
and  importance,  either  by  the  development  of  its  internal 
resources  along  the  lines  of  the  railroads,  or  the  opening  of 
new  and  important  lines  of  communication  with  other  States. 
Railroading  was  then  in  its  infancy ;  and  there  seemed  to  be 
good  reason  why  the  State,  having  in  view  the  development 


1878.] 


HOUSE  — No.  276. 


28 


of  its  commerce,  should  use  its  credit  to  aid  and  stimulate 
private  enterprise  in  the  direction  of  railroads,  the  profit  of 
which  as  investments  were  then  wholly  problematical.  Such 
undoubtedly  were  the  considerations  which  led  the  State  to 
embark  upon  the  policy  of  assisting  railroads ;  and  this  policy 
has  controlled  its  action  in  every  case  up  to  the  present  time. 
After  1840  no  State  aid  was  granted  until  the  year  1854, 
when  the  Hoosac  Tunnel  was  commenced.  The  object  of 
the  State  in  all  its  dealings  with  the  tunnel  has  always  been 
the  development  of  the  commercial  relations  of  the  State 
with  the  West,  rather  than  the  hope  of  any  pecuniary  profit 
from  its  venture.  No  other  loan  has  been  made  to  a  railroad, 
excepting  that  to  the  Boston,  Hartford,  and  Erie  Railroad  in 
1867,  which  was  made  with  the  same  purpose  in  view. 

We  find,  then,  that  the  sole  ground  of  investment  hereto¬ 
fore  has  been  the  promotion  of  the  commercial  prosperity, 
internal  and  external,  of  the  Commonwealth.  It  is  very 
questionable  whether  even  such  an  object  can  justify  the 
State  in  thus  aiding  what  are,  after  all,  but  private  enter¬ 
prises.  The  Bill  of  Rights  thus  defines  the  functions  of  the 
State  :  “  The  end  of  the  institution,  maintenance,  and  adminis¬ 
tration  of  government  is  to  secure  the  existence  of  the  body 
politic,  to  protect  it,  and  to  furnish  the  individuals  who  com¬ 
pose  it  with  the  power  of  enjoying  in  safety  and  tranquillity 
their  natural  rights  and  the  blessings  of  life.”  Thus,  in  the 
compact  on  which  the  government  of  the  State  is  based,  its 
objects  were  clearly  defined,  and  its  scope  strictly  limited. 
With  these  words  before  us,  it  is  difficult  to  see  how  the 
Commonwealth  has  any  business  with  railroading  at  all,  even 
if  the  object  be  the  prosperity  of  the  people ;  and  it  is  prob¬ 
able  that  the  framers  of  that  compact  of  government  little 
thought  of  such  an  application  of  its  functions. 

But,  granting  that  the  end  justifies  the  policy,  does  the 
application  of  this  railroad  present  such  considerations?  We 
think  not.  It  is  not  a  case  where  a  new  section  of  the  State 
is  to  be  developed  by  the  location  of  the  road.  But  a  small 
portion  of  this  railroad  lies  within  the  Commonwealth ;  and 
every  dollar  of  the  loan  not  used  in  paying  the  debts  will  be 
expended  outside  the  State,  and  within  the  borders  of,  and  for 
the  local  benefit  of,  a  State  that  has  never  given  any  thing  to 
the  road.  Nor  is  it  a  case  where  the  interests  of  the  State  re- 


24  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


quire  a  new  line  to  the  West.  With  the  Boston  and  Albany- 
line,  the  Hoosac  Tunnel  line  (which  is  soon  to  make  an  inde¬ 
pendent  connection  with  the  Erie  Road),  and  the  Ogdensburg 
and  Grand  Trunk  system,  there  is  no  possible  danger  that  the 
State  or  the  people  will  suffer  from  monopoly  or  insufficiency 
of  communication  with  the  West ;  and  it  was  demonstrated  as 
long  ago  as  1870,  at  the  hearing  before  the  Railroad  Committee, 
that  this  line,  when  completed,  will  possess  no  important  ad¬ 
vantages,  in  grades,  distances,  or  efficiency  of  connections, 
over  either  of  the  other  trunk-lines.  The  managers,  moreover, 
assert  that  the  road  is  to  be  completed  in  any  event ;  if  not 
by  the  State  loan,  then  with  the  proceeds  of  the  mortgage 
already  authorized.  Whether  that  is  so  or  not,  it  is  evident 
that  its  immediate  completion  cannot  be  regarded  as  a  matter 
of  such  public  importance  to  the  people  of  the  State  as  to 
authorize  a  further  loan  of  its  credit  for  that  reason  only. 

It  follows  that  the  only  considerations  which  have  hereto¬ 
fore  been  regarded  as  justifying  the  investment  by  the  State 
in  railroad  enterprises  are  wholly  wanting  in  this  case. 

But  if  the  loaning  the  people’s  credit  to  a  railroad  be  of 
doubtful  policy,  when  the  object  is  the  development  of  the 
resources  of  the  State,  what  shall  we  say  when  it  is  for  spec- 
ulation  and  profit  only?  Yet  such  is  exactly  the  proposition 
under  consideration.  It  is  proposed  that  the  Commonwealth 
of  Massachusetts  shall  furnish  money  to  complete  a  railroad 
in  Connecticut  and  New  York,  and  pay  the  debts  of  the  road, 
—  an  enterprise  as  opposed  to  the  proper  functions  of  a  great 
body  politic  as  light  is  to  darkness ;  and  that  it  shall  do  this 
for  the  reason  that  it  can  borrow  money  at  five  per  cent,  and 
the  railroad  will  pay  it  eight  per  cent,  and  the  difference  is 
a  profit.  Its  accidental  and  unfortunate  ownership  of  three- 
twentieths  of  the  railroad  does  not  change  the  case  in  the 
slightest  degree  as  a  matter  of  public  policy.  That  owner¬ 
ship  is  simply  the  undesired  result  of  a  previous  loan  to  the 
road,  made,  not  with  a  view  to  any  such  result  nor  pecu¬ 
niary  profit,  but  solely  on  account  of  the  supposed  importance 
to  the  State  of  the  completed  road.  Although  technically 
an  ownership,  it  represents  simply  the  old  loan ;  and  there  is 
no  call  upon  the  State,  by  reason  of  its  nominal  position  as 
owner,  to  assume  any  of  the  responsibilities  or  duties  which 


1878.] 


HOUSE  — No.  276. 


25 


usually  attach  to  ownership.  Notwithstanding  a  portion  of 
the  stock  is  in  the  hands  of  the  State,  it  remains  true,  that 
for  the  State  to  go  into  this  new  investment  puts  it  in  the 
position  of  a  mere  railroad  speculator ;  and,  if  the  result  of 
the  speculation  should  be  financially  good,  yet  the  dangers  of 
the  bad  precedent,  thus  for  the  first  time  set,  would  far  out¬ 
weigh  in  importance  any  possible  pecuniary  gain  that  could 
result  from  its  speculation. 

A  mortgage  necessarily  implies  possible  foreclosure.  But 
can  any  thing  be  imagined  more  disastrous  to  the  State  than 
to  become  the  owner  by  foreclosure  of  a  railroad  over  three 
hundred  miles  in  length,  running  through  four  different 
States,  with  all  its  interests,  financial  and  otherwise,  com¬ 
mitted  to  the  care  of  the  officials  of  the  Commonwealth? 
The.  possibility  of  such  an  event  is  of  itself  sufficient  to  deter 
the  State  from  adopting  a  measure  which  contemplates  even 
contingently  such  a  misfortune. 

To  sum  up  the  case,  we  have  on  the  one  side  a  possible  — 
it  would  perhaps  be  fairer  to  say,  a  probable — saving  of  a 
hundred  and  eighty  thousand  dollars  per  year.  Against  that 
we  have  to  put  an  actual  increase  in  the  State  debt  of  six 
million  dollars ;  the  engaging  by  the  State  in  a  business 
totally  foreign  to  its  legitimate  and  proper  functions ;  a 
precedent  of  legislation  set  that  can  only  work  injury ;  a  door 
opened  for  further  demands  upon  the  treasury,  not  only  by 
this  but  by  other  enterprises,  which  can  scarcely  be  closed 
again ;  to  say  nothing  of  the  disastrous  possibility  that  the 
State  may  be  compelled  by  any  circumstances  to  take  pos¬ 
session  of  this  road ;  and  the  danger  of  indissolubly  connect¬ 
ing  the  Commonwealth  with  a  railroad  enterprise,  to  the 
extent  of  the  whole  present  value  of  the  road,  which  railroad 
is  subject  to  the  contingencies  of  hostile  legislation  in  three 
different  States. 

The  annual  loss  of  a  hundred  and  eighty  thousand  dol¬ 
lars,  —  about  one-tenth  of  the  present  State  tax,  —  continuing 
for  twenty  years  longer,  is  not  a  pleasant  thing  to  contem¬ 
plate  ;  but  it  is  far  preferable  to  the  commitment  of  the 
State  to  a  policy  so  unwise,  so  unsafe,  and  so  fraught  with 
evil  results. 


26  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 

As  the  stock  possesses  but  little  present  value,  the  under¬ 
signed  see  no  reason  for  recommending  its  sale  at  the  present 
time.  We  therefore  report  that  no  legislation  is  expedient 
in  the  premises. 

HOSEA  M.  KNOWLTON, 
Of  the  Senate, 
RUFUS  A.  SOULE, 

Of  the  House, 


1878.] 


HOUSE  — No.  276. 


27 


^ommonwcctltl)  of  illaooadjuoctto. 


MINORITY  REPORT. 


Boston,  April  5,  1878. 

We  the  undersigned,  a  minority  of  the  Committee  on  Railroads, 
not  being  able  to  agree  with  our  associates,  the  majority  of  the 
Committee,  upon  the  question  of  State  aid  to  the  New-York  and 
New-England  Railroad,  therefore  most  respectfully  submit  our 
views  upon  that  subject.  We  have  given  the  case  careful  atten¬ 
tion,  and  we  confidently  trust  we  can  give  good  and  sufficient  rea¬ 
sons  for  our  decision. 

First,  We  think  that  the  time  has  come  for  the  State  to  decline 
to  loan  its  credit  in  the  construction  or  purchase  of  railroads, 
and  that  such  policy  should  be  fully  and  openly  declared  by  the 
legislature  ;  and  this  question  has  been  so  well  stated  by  the  Rail¬ 
road  Committee  to  this  legislature,  in  a  Report  made  in  the  case  of 
the  Boston  and  Poughkeepsie  Railroad  (House  Document,  No.  138, 
on  pages  4  and  5) ,  that  we  feel  justified  in  quoting  from  that  Report, 
believing  it  to  be  applicable  to  the  case  under  consideration.  The 
Committee  there  say,  — 

“  The  experience  of  the  State  in  railroad-building,  and  in  loaning  its 
credit  to  others  to  build  railroads,  has,  in  the  main,  been  a  bitter  one;  and 
to-day  the  tax-payers  of  the  State  are  called  upon  to  pay  the  annual  interest 
on  over  $20,000,000  so  expended,  with  absolutely  no  reduction  of  transporta¬ 
tion-charges  as  a  consequence  of  the  expenditure.  In  the  early  days  of  rail¬ 
road-building,  the  assistance  of  the  State  may,  perhaps,  have  been  necessary 
to  induce  private  capital  to  enter  an  untried  field  of  operations ;  but  to-day 
no  such  necessity  exists.  Massachusetts  capital  has  built  railroads  in  the 
West,  with  the  inducement  of,  at  best,  a  very  moderate  return  in  the  shape  of 
dividends ;  and,  if  a  railroad  nearer  home  promises  alike  return,  there  should 
be  no  difficulty  in  securing  the  funds  necessary  for  its  construction.  If  a  rail¬ 
road  cannot  be  built  to-day  without  aid  from  state,  city,  or  town,  it  is,  as  a 
rule,  sufficient  evidence  that  it  should  not  be  built  at  all.  The  State  has  no 
money  but  what  it  raises  by  taxation  from  the  people;  and,  with  the  present 


28  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


railroad  service  of  the  State,  there  would  seem  to  be  no  reason  why  all  the 
tax-payers  of  the  State  should  be  compelled  to  subscribe  towards  building  a 
railroad  to  which,  in  their  private  capacity  as  citizens,  they  decline  to  con¬ 
tribute. ’’ 

This  doctrine  here  quoted  from  the  Report  was  the  judgment  of 
the  Railroad  Committee  as  a  whole,  not  merely  the  opinion  of  a 
minority  :  therefore  the  majority  of  the  Committee  who  now  report 
in  favor  of  a  loan  to  the  New-York  and  New-England  Railroad 
should  convince  the  legislature,  before  asking  the  adoption  of  their 
views  respecting  the  proposed  loan,  that  it  is  a  case  which  justifies 
the  exception  of  a  good  rule  and  the  violation  of  a  sound  princi¬ 
ple  ;  and  we  hope  the  legislature  will  hesitate  before  they  tram¬ 
ple  upon  and  discard  a  doctrine  they  have  so  recently  indorsed 
and  approved  of. 

We  are  here,  as  members  of  the  legislature,  to  legislate  for  the 
whole  people  of  the  State,  and  to  carefully  guard  and  protect  the 
interests  of  the  Commonwealth,  and,  in  the  expenditure  of  money, 
should  remember  that  it  is  the  people’s  money,  the  people’s  prop¬ 
erty,  the  homes  of  all,  —  rich  and  poor  alike,  —  that  we  must  pro¬ 
tect  ;  and  we  have  no  moral  right  to  impose  a  burden  of  taxation 
upon  the  people  not  actually  necessary,  and  for  the  greatest  good 
of  the  greatest  number.  But  it  is  claimed  by  a  majority  of  the 
Railroad  Committee  that  the  proposed  loan  is  justified  by  the  fact 
that  the  State  has  already  $3,600,000  invested  in  this  railroad,  and 
that  this  new  loan  is  in  the  line  of  protection  of  the  State’s  owner¬ 
ship  in  this  road. 

If  it  can  be  actual^  demonstrated  that  the  State  can,  by  grant¬ 
ing  this  loan,  secure  and  make  the  previous  investment  valuable, 
then,  and  not  till  then,  can  any  reason  be  found  to  justify  the 
proposed  loan.  And  even  then  there  are  good  arguments  against 
the  proposition ;  for  we  hold  it  is  no  part  of  the  legitimate  duties 
of  the  State  to  own  or  operate  railroads,  and  that  the  injury  to 
any  State  in  engaging  in  such  work  is  not  wholly  to  be  computed 
in  money.  It  breaks  down  barriers,  it  establishes  bad  precedents, 
and  it  serves  to  demoralize,  and  discourages  private  capitalists  in 
legitimate  enterprises.  Under  monarchical  forms  of  government, 
it  may  succeed  to  engage  in  business  of  various  kinds  ;  but,  under 
our  republican  form  of  government,  it  is  to  be  hoped  we  have 
not  drifted  so  far  from  our  moorings  as  to  operate  railroads,  build 
factories,  and  sell  merchandise,  in  the  name  of  the  State. 

We  believe  it  should  be  the  policy  of  the  State,  so  far  as  practi¬ 
cable,  to  sever  its  connection  with  all  railroad  enterprises,  and  in 
no  event  to  assume  new  burdens  in  that  direction. 

The  New-York  and  New-England  Railroad,  the  successor  of  the 


1878.] 


HOUSE  — No.  276. 


29 


old  Boston,  Hartford,  and  Erie  Railroad,  comes  here,  b}T  its  officers 
and  managers,  to  invoke  aid  from  the  State :  it  is  for  this  legisla¬ 
ture  to  say  whether  we  shall  hazard  the  sum  asked  for  or  not.  The 
history  of  this  road  is  familiar  to  all.  While  we  have  no  special 
criticism  to  make  as  to  its  present  officers  and  managers,  we  do 
claim  that  the  old  managers  of  the  Boston,  Hartford,  and  Erie 
Railroad,  in  former  years  so  presented  their  case  to  a  Massachu¬ 
setts  legislature  as  to  induce  the  State  to  invest  $3,600,000  in  its 
bonds,  which  bonds  were  afterwards  converted  into  stock  in  the 
new  corporation  known  as  the  New- York  and  New-England  Cor¬ 
poration  ;  and  this  stock  held  by  the  State  has  paid  no  interest  or 
dividends,  and  its  market-value  is  very  slight.  But  the  State  is 
obliged  to  tax  the  whole  people  of  the  State  annually  to  the  extent 
of  $180,000  to  pay  the  interest  on  the  loan,  and  there  is  no  escape 
from  it.  We  must  continue  to  pay  this  interest  ($180,000)  each 
year,  until  the  bonds  mature,  'when  it  is  supposed  the  sinking-fund 
already  established  for  that  purpose  will  be  sufficient  to  pay  the 
principal. 

No  one  will  deny  but  that  the  State  was  deceived  or  misled 
when  that  loan  of  $3,600,000  was  made.  Are  we  wiser  and  more 
sagacious  than  the  legislature  of  1867? 

Shall  the  State  invest  more  money  in  an  enterprise  where  saga¬ 
cious  private  capitalists  refuse  to  invest  a  single  dollar  ? 

May  not  coming  legislatures  criticise  and  condemn  our  action  in 
the  proposed  loan  as  freely  as  we  do  the  action  of  the  legislature 
of  1867? 

The  scheme  in  1867,  we  must  assume,  appeared  plausible  ;  but 
it  proved  to  be  disastrous  to  the  State.  Are  we  now  to  adopt 
plausible  theories,  and  admit  ingenious  arguments  made  by  inter¬ 
ested  parties,  as  true?  In  short,  is  it  safe,  is  it  wise,  for  the  State 
to  loan  its  credit  for  $6,000,000,  or  any  other  amount,  to  any  rail 
road  company  wherein  private  capitalists  refuse  to  invest?  We 
think  not.  We  refer  for  particulars  and  details  relative  to  this 
corporation  to  certain  legislative  documents  within  the  reach  of 
all  the  members.  We  wish  every  member  of  the  legislature  would 
thoroughly  examine  the  Special  Report  of  the  Railroad  Commis¬ 
sioners  (House  Document,  325)  of  the  year  1877  ;  also  the  Report 
of  the  Joint  Special  Committee  of  the  legislature  of  1877,  which 
Committee  investigated  the  subject,  and  reported  to  this  legisla¬ 
ture,  their  Report  being  House  Document  of  1878,  No.  2. 

We  do  not  deem  it  necessary  to  reprint  these  documents  as  part 
of  our  Minority  Report,  but  trust  that  such  members  as  have  not 
already  examined  these  documents  will  do  so  before  they  vote  to 
loan  the  State’s  credit  for  any  sum  in  aid  of  this  corporation ;  and 


30 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


we  shall  content  ourselves  with  a  general  statement  of  the  case  as 
understood  by  us. 

The  New- York  and  New-England  Railroad  proper  runs  from 
Boston  to  Willimantic,  Conn.,  a  distance  of  eighty-six  miles, 
main  line,  and  from  Brookline,  Mass.,  to  Woonsocket,  R.I., 
thirty-four  miles ;  branches  from  East  Thompson  to  Southbridge 
thirty-four  miles,  and  from  Islington  to  Dedham  two  miles.  It  also 
operates  the  Norwich  and  Worcester  Railroad,  partly  in  Massa¬ 
chusetts,  and  partly  in  Connecticut,  sixty-six  miles. 

This,  at  present,  comprises  all  the  road  operated  by  the  New- 
York  and  New-England  Railroad  Company.  It  is  claimed,  and 
we  do  not  know  as  it  is  seriously  disputed,  that  said  company  also 
own  the  equity  of  redemption  of  the  Hartford,  Providence,  and  Fish- 
kill  Railroad,  extending  from  Providence,  R.I.,  to  Waterbur}’,  Conn., 
a  hundred  and  twenty-three  miles  (no  part  of  it  in  Massachusetts) , 
upon  which  there  is  an  underlying  mortgage  of  $2,000,000  and  over. 
And  it  also  appears  there  are  other  encumbrances  or  claims,  about 
which  there  is  dispute  ;  and  it  is  understood  the  question  is  before  the 
courts  in  Connecticut  or  Rhode  Island,  or  both.  We  are  not  suffi¬ 
ciently  advised  to  give  an  opinion  as  to  the  extent  of  these  other 
claims,  or  as  to  the  probable  results  in  the  courts  or  elsewhere : 
we  simply  know  claims  are  made  by  shareholders  of  preferred  stock 
and  of  common  stock,  and  that  whoever  shall  pay  off  the  $2,000,000 
bonds  of  Hartford,  Providence,  and  Fishkill  Railroad,  w^ould  be 
reasonably  sure  of  a  lawsuit.  The  managers  of  the  New-York  and 
New-England  Railroad  assure  us  that  the  amount  involved  is  not 
large,  and  that  it  is  not  to  be  considered  as  a  serious  encumbrance  ; 
but  the  parties  and  their  attorneys  making  the  claim  insist  that 
their  claim  is  valid.  (See  Railroad  Commissioners’  Special  Re¬ 
port,  1877,  House  Document  325,  page  5.) 

The  New-York  and  New-England  Railroad  also  is  the  owner  of 
the  franchise  from  Waterbury,  Conn.,  to  Hopewell  Junction  in 
New  York,  and  to  extend  to  the  Hudson  River.  A  large  amount 
of  money  has  been  expended  upon  this  part,  from  W aterbury  west¬ 
erly  sixty-five  miles  to  Hopewell  Junction;  and  it  is  estimated 
that  $1,600,000  would  complete  it. 

We  have  not  great  faith  in  estimates  where  the  State’s  money  is 
to  be  used.  The  estimated  cost  of  the  Hoosac  Tunnel  and  the 
estimated  cost  of  the  Danvers  Hospital  are  fresh  cases  in  point 
where  estimates  are  not  always  to  be  relied  upon. 

The  western  termini  of  this  unfinished  proposed  road  are  not 
definitely  settled :  Fishkill,  Poughkeepsie,  and  Haverstraw  are 
named.  And,  before  knowing  to  which  point'  on  the  Hudson  the 
road  is  to  end,  we  are  unable  to  discuss  the  question  properly ; 


1878.] 


HOUSE  — No.  276. 


81 


bat  suffice  it  to  say  the  New-York  and  New-England  Railroad 
is  to  run  from  Boston  to  the  Hudson  River,  crossing  the  Hartford, 
New  Haven,  and  Springfield  at  Hartford,  then  crossing  the  Housa- 
tonic  Railroad  and  the  New-York  and  Harlem  before  reaching  the 
the  Hudson  River. 

The  question  which  suggests  itself  is,  Will  it  pay  the  State  to 
invest  in  it?  If  it  will,  why  do  not  capitalists  and  railroad-men 
invest  their  money  there  ?  As  to  the  unfinished  portion,  we  do  not 
believe,  if  it  was  to  be  completed,  that  it  would  be  worth  what  it 
would  cost ;  for  there  is  now  a  railroad  known  as  the  Connecticut 
Western,  running  from  Hartford  westward,  with  connections  to 
Poughkeepsie,  not  twenty  miles  from,  and  nearty  parallel  with,  this 
proposed  road  ;  and  the  Connecticut  Western  is  a  bankrupt  road. 
The  people  who  furnished  the  money  to  build  this  road  are  fully 
convinced  that  no  road  from  Hartford  to  the  Hudson  River  can  be 
profitably  operated  if  built. 

This  whole  subject  was  examined  by  the  Joint  Special  Commit¬ 
tee  of  the  legislature,  and  reported  upon  in  document  heretofore 
referred  to  (House  Document,  No.  2,  1878). 

The  managers  of  the  New-York  and  New-England  Railroad  pre¬ 
sent  their  case  with  great  ingenuity,  and  an  arra}^  of  figures  and 
computations  as  to  the  present  value  of  their  property  now  com¬ 
pleted,  as  well  as  the  prospective  value  of  the  proposed  and  un¬ 
finished  portion  when  it  shall  be  completed  as  a  whole.  They 
also  show  great  ingenuity  in  presenting  their  statement  as  to  the 
earning  capacity  of  the  road  now  in  operation.  They  ask  us  to  be 
satisfied  with  their  showing,  and  to  accept  their  conclusions,  and 
express  great  confidence  as  to  the  future.  But  it  seems  thejr  have 
not  been  able  to  convince  private  capitalists  that  it  can  be  made  a 
good  investment  (for  we  are  not  aware  that  State  Street  has 
shown  any  s3Tmptoms  of  furnishing  the  money  to  complete  the  road) , 
but  simply  content  themselves  with  speculating  in  the  old  Berdell 
bonds,* — practically  gambling  on  the  chances  of  a  new  loan  by  the 
State  to  this  railroad  company,  which  might  temporarily  advance 
the  price  of  a  bond  now  almost  or  quite  worthless  in  realit}’.  And 
we  are  aware  of  the  fact  that  great  influence  is  attempted  in  fur¬ 
therance  of  a  loan  by  the  State  for  selfish  ends :  it  is  practically 
gambling  on  the  votes  of  this  legislature  ;  and  men  whose  pockets 
are  filled  with  Berdell  bonds  are  pressing  upon  members  to  vote 
for  the  proposed  loan. 

We  refer  to  documents  as  to  the  earning  capacity  of  the  road 
now  operated  by  the  company.  It  is  an  old  saying,  that  “  figures 
will  not  lie ;  ”  but  we  are  convinced  that  figures  do  not  always  tell 
the  whole  truth,  and  the  last  few  years  have  convinced  all  of  us 


82  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


that  figures  on  paper  are  not  always  to  be  relied  upon.  The  great 
shrinkage  in  railroad  stocks  and  bonds  since  1873  has  ruined  many 
people,  and  they  are  now  of  the  opinion  that  figures  may  lie  ;  and 
we  will  simply  cite  the  State’s  investment  of  $3,600,000  originally 
in  the  Berdell  bonds. 

We  refer  specially  to  the  House  Document,  No.  2,  of  1878,  here¬ 
tofore  referred  to,  showing  earning  capacity.  And  even  in  this 
.there  maybe  some  errors  ;  for  it  would  be  impossible  for  that  Com¬ 
mittee  to  know,  of  their  own  knowledge,  all  the  facts ;  and  the 
way  in  which  railroad  books  are  sometimes  kept  in  other  cases 
have  served  to  mislead,  if  not  to  deceive.  We  make  no  charges 
in  this  case  ;  but,  when  it  is  claimed  by  the  managers  that  there 
has  been  a  net  gain  for  the  last  two  years,  we  say  it  is  not  proven. 
The  charges  to  extraordinary  expenses,  perhaps,  should  have  been 
classed  as  ordinary ;  for  we  find  in  the  last  Annual  Report  of  the 
company,  they  claim  that  the  surplus  net  earnings  for  the  year 
ending  Sept.  30,  1877,  were  $70,521.60.  But  we  also  find  that  the 
company  charged  off  to  property-account  during  the  same  time 
$71,200.04  ;  so  that  the  assumed  surplus  was  more  than  exhausted 
in  what  is  claimed  as  improvements.  There  is  no  surplus  available 
for  paj’ing  debts  or  interest;  for  we  find  that  by  the  treasurer’s 
report,  Sept.  30,  1877,  cash  on  hand  was  $7,820.86.  As  a  rule, 
cash  on  hand  is  a  good  test  of  ability  to  meet  obligations. 

The  earning  capacity  of  the  New-York  and  New-England  Rail¬ 
road,  and  of  the  Providence,  Hartford,  and  Fishkill  Railroad, 
being  fully  stated  in  the  Report  of  the  Joint  Committee  (House 
Doc.,  No.  2),  we  feel  justified  in  the  statement,  that  it  furnishes 
no  such  security  as  would  justify  a  prudent  man  to  loan  money 
upon  to  such  a  corporation,  relying  upon  net  earnings  to  pa}T  either 
principal  or  interest,  though  by  an  ingenious  mode  of  book-keeping 
credit  balances  might  appear.  We  invite  a  careful  reading  of  the 
document  referred  to,  that  each  member  may  judge  for  himself. 

We  do  not  believe  that  a  loan  of  $6,000,000  even  will* relieve 
the  New-York  and  New-England  Railroad  Company  of  its  present 
wants,  and  therefore  cannot  agree  with  the  majority  of  the  Com¬ 
mittee  on  that  point ;  for  there  are  no  provisions  for  purchasing 
terminal  facilities  and  depot-grounds  in  Boston,  as  the  Company 
are  now  paying,  as  appears  by  their  Report,  $55,000  annually  as 
rental  for  depot-grounds ;  and,  if  a  purchase  was  to  be  made,  a 
large  sum  would  be  required,  — from  $500,000  upwards,  —  and  the 
cry  would  be,  44  We  must  borrow  more  money  from  the  State  for 
that  purpose.” 

Nor  do  we  admit  as  true  the  statement  as  to  other  encumbrances 
and  floating  indebtedness  ;  and  we  feel  fully  justified  in  saying  that 


1878.] 


HOUSE  — No.  276. 


a  loan  of  $6,000,000  will  not  give  the  relief  desired  by  the  Com¬ 
pany,  but  simply  serve  as  an  argument  for  another  loan  by  the 
State. 

Therefore  we  claim  that  the  road,  as  now  operated,  cannot 
justify  the  loan  of  another  dollar  of  the  State’s  money.  Not  one 
dollar  of  interest  has  been  paid  on  the  $3,600,000,  the  original 
loan ;  and  this  railroad  company  owe  the  State  $250,000  besides 
for  money  borrowed  and  overdue.  And  we  say  the  State  was  mis¬ 
led  and  deceived  in  the  original  loan  ;  and  that,  in  the  last  loan  of 
$250,000  to  the  present  railroad  company,  this  company  has  not 
redeemed  its  promises. 

It  is,  moreover,  wholly  beside  the  question,  whether  the  security 
offered  in  this  case  is  sufficient,  or  otherwise.  Even  though  it 
were  sufficient  in  the  hands  of  private  parties,  in  those  of  the  State 
it  is  not.  A  private  party  can  and  will  enforce  the  letter  of  the 
bond  :  the  State  notoriously  cannot.  Massachusetts,  at  least,  it 
would  seem,  should  have  had  recent  and  bitter  experience  on  that 
point,  —  something  not  at  once  to  be  forgotten.  The  vast  outlay 
for  the  Hoosac  Tunnel  was  incurred  on  the  strength,  in  part,  of  a 
contract  gladly  entered  into  by  the  Fitchburg  Railroad  Company, 
that,  when  it  was  completed,  the  State  should  receive  from  that 
road  twenty  per  cent  of  the  receipts  from  all  business  coming  to 
it  because  of  the  tunnel.  No  sooner,  however,  was  the  tunnel 
secure,  and  the  contract  pressing,  than  the  railroad  company 
repined  at  its  severity,  and  secured  its  abrogation,  —  secured  it  for 
the  mere  asking. 

So  it  will  be  again  in  the  present  case.  Let  the  bond  be  for¬ 
feited,  and  the  State  will  be  called  upon  by  an  interest  hard  to 
oppose,  and  upon  grounds  which  no  legislature  will  resist,  not  to 
enforce  its  obligations.  The  Commonwealth,  it  will  then  be  urged, 
should  not  be  a  usurer.  The  unfortunate  private  partners  had 
acted  in  good  faith,  and  had  merely  over-estimated  their  ability. 
To  enforce  the  penalty  would  be  cruel,  —  the  act  of  a  Shy  lock,  — 
and  the  penalty  will  not  be  enforced.  As  between  the  State  and 
its  private  partners,  these  contracts  are  not  equal :  they  have  but 
one  side  to  them.  They  are  binding  only  against  the  State.  It 
has  always  been  so.  It  will  assuredly  prove  so  in  this  case. 
When  it  does  prove  so,  the  undersigned  ma}^  be  allowed  to  express 
a  hope  that  this  prediction  will  not  remain  uncited. 

The  various  documents  and  reports  heretofore  referred  to  may 
be  found  by  all  members,  and  by  the  public,  and  we  ask  for  a  care¬ 
ful  examination  ;  and,  before  any  member  shall  vote  in  favor  of  the 
proposed  loan,  we  desire  he  may  have  a  full  and  complete  under¬ 
standing  of  the  whole  case. 


84  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


We  have  become  entirety  satisfied  that  it  is  not  wise  to  loan  one 
dollar  more  to  the  New- York  and  New-England  Railroad  Com¬ 
pany  ;  for,  suppose  the  loan  was  to  be  made  upon  the  terms  and 
conditions  of  the  bill,  who  can  foresee  or  foretell  the  results?  —  the 
State  of  Massachusetts  the  principal  owner  in  a  railroad  located 
in  four  different  States,  subjected  to  the  action  of  four  different 
legislatures  in  the  passage  of  laws,  and  to  four  separate  courts  as 
to  the  interpretation  of  the  law.  Suppose  the  road  shall  finally 
be  constructed  to  the  Hudson  River  by  the  State  money,  and  the 
company,  the  mortgagors,  shall  fail  to  meet  its  obligation,  and  the 
State  is  compelled  to  foreclose  its  mortgage,  take  possession  and 
operate  the  road  :  then  we  may  find  Massachusetts  contending  with 
the  legislatures  and  the  courts  of  Rhode  Island,  Connecticut,  and 
New  York,  the  State  operating  a  railroad  in  New  York,  the  State 
owning  barges,  ferry-boats,  and  docks  and  wharfs,  on  the  Hudson 
River. 

Such  a  state  of  things  might  be  advantageous  to  the  cunning 
and  shrewd  railroad-managers,  who  might  see  a  chance  to  profit 
by  it ;  but  citizens  of  Massachusetts  do  not  wish  to  see  the  State  a 
party  direct,  or  by  trustee,  to  lawsuits,  or  before  judges  for  hear¬ 
ings  for  injunctions. 

We  claim,  that,  as  the  proposed*  terminus  of  the  New-York 
and  New  England  Railroad  is  the  Hudson  River,  if  the  road 
should  be  completed,  there  wrould  then  be  a  call  for  additional  aid 
to  go  farther ;  for  as  yet  there  is  no  bridge  across  the  river  at 
Poughkeepsie.  And,  if  the  proposed  road  shall  run  to  Poughkeep¬ 
sie,  we  predict  there  will  be  no  bridge  constructed  for  the  present, 
and  that  the  State  of  Massachusetts  will  be  implored  to  furnish 
the  money  to  complete  it ;  for  the  city  of  New  York  has  no  special 
interest  in  the  bridge. 

And  the  argument  will  then  be  at  this  State  House :  The  State 
now  has  nearly  $10,000,000  in  the  road,  and  the  bridge  will  give 
it  life. 

If  the  road  is  to  end  at  Fishkill,  there  can  be  no  bridge.  Here 
the  company  must  cross  the  river  by  ferry,  or  on  the  ice  ;  for  the 
river  freezes  over  at  this  point.  When  across  the  river  from  Fish- 
kill  to  Newburgh,  the  company  can  connect  writh  a  branch  of  the 
Erie  Railroad  now  being  operated  by  a  receiver  ;  and  it  cannot  now 
be  known  by  wrhom  that  bankrupt  road  is  to  be  operated  in  the 
future.  For  aught  we  know,  it  may  be  entirety  controlled  in  the 
interest  of  New-York  City.  Wealthy  citizens  and  railroad  men 
of  New  York  appeared  before  the  Committee,  urging  Massachusetts 
to  build  this  road,  —  men  whose  great  interests  are  in  New-York 
City.  It  was  not  love  for  Massachusetts,  or  a  pride  and  interest 


1878.] 


HOUSE  -  No.  276. 


85 


in  the  commercial  prosperity  of  Boston  ;  but  it  was  something  else  ; 
for,  if  the  investment  is  so  safe  as  represented,  they  would  invest 
some  of  their  own  now  idle  capital  therein.  But  no :  they  say  it 
will  be  good  for  Massachusetts. 

We  desire  to  call  special  attention  to  the  Report  of  the  Legisla¬ 
tive  Committee  of  1867  (House  Document,  299,  of  that  year),  to  be 
found  in  the  legislative  documents  of  that  year  (may  be  found  in 
the  library  and  in  any  of  the  committee-rooms  of  the  State  House) . 
This  Committee  reported  in  favor  of  a  loan  of  $3,000,000  to  the 
Boston,  Hartford,  and  Erie  Railroad.  This  was  the  entering- 
wedge  ;  this  was  the  fatal  step :  and  in  the  light  of  to-day  it  is 
interesting  to  read  what  that  Committee  said  eleven  }'ears  ago. 
This  Report  is  too  voluminous  to  reprint ;  but  wre  do  ask  members 
to  read  it.  We  will  quote  from  it  briefly,  as  occasion  may  require. 
The  Committee  conclude  their  Report  as  follows  :  — 

“Your  Committee  have  given  this  subject  careful  examination  and  mature 
deliberation ;  and  we  arrive  at  the  result,  that,  in  whatever  aspect  we  view 
the  petition,  its  request  seems  reasonable,  and  the  State  cannot  afford  to 
deny  its  prayer. 

“As  a  public  and  a  financial  measure  it  meets  our  approval ;  and  we  there¬ 
fore  unanimously  recommend  the  passage  of  the  bill.” 

This  was  a  bill  granting  aid  for  $3,000,000  ;  and  the  legislature 
enacted  it,  and  it  became  a  law  eleven  years  ago.  We  have  been 
trying  to  realize  that  this  was  a  good  financial  measure.  While 
the  State  has  been  obliged  to  raise  b}7  taxation  $180,000  annually 
to  pay  the  interest  on  the  loan  it  made  for  this  purpose,  not  one 
dollar  has  been  returned  to  the  State  treasury  by  the  railroad 
company. 

This  Committee  also  said,  on  page  18  of  their  Report,  “No 
scrip  shall  be  issued  until  the  Governor  and  Council  shall  be  satis¬ 
fied  that  the  company  by  itself,  or  by  aid  from  other  sources  than 
the  Commonwealth,  will  be  able  to  complete  its  road  from  Boston 
to  the  Hudson  River.’’  —  See  Laws  of  1867,  chapter  285,  sec¬ 
tion  7. 

The  scrip  was  issued.  The  road  was  not  and  is  not  now  com¬ 
pleted.  So  much  for  provisions  in  a  bill  “  to  the  satisfaction  o 
the  Governor  and  Council.” 

The  testimony  seemed  to  convince  that  Committee  that  the 
following  was  a  correct  estimate  of  the  gross  receipts  of. the  road  ; 
and  we  copy  it  verbatim  from  that  Report,  page  11:  — 


36 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


Local  freight  and  passengers . $2,365,000  00 

Iron  ore  and  iron .  360,000  00 

Lumber .  375,000  00 

Stock .  75,000  00 

Through  freight .  1,180,000  00 

Through  passengers .  150,000  00 

Coal .  1,650,000  00 

Petroleum .  180,000  00 


Total . $6,335,000  00 


“Other  witnesses  agree  substantially  with  these  statements,  and  also  that 
the  fair  estimate  of  expense  of  operating  a  road,  of  the  alignment  and  curva¬ 
tures  of  this,  is  sixty  per  cent  of  gross  earnings.  Assuming  this  to  be  a  fair 
and  correct  estimate  of  business,  there  would  be  left,  to  pay  interest,  taxes, 
and  dividends, $2, 534, 000.” 

Then,  on  page  22  of  said  Report,  this  loan  is  urged  as  a  war 
measure  ;  and  we  feel  constrained  to  quote  from  it  at  length. 
Upon  that  point  the  Committee  there  sa,y,  — 

“  It  has  been  further  urged  that  it  is  wise,  in  times  of  peace,  to  prepare  for 
war.  It  was  asked,  Suppose,  at  the  time  the  charter  of  the  Boston,  Hartford, 
ahd  Erie  Railroad  was  granted  (1863),  the  opinion  of  a  large  class  of  our 
citizens  had  been  verified,  and  we  had  had  a  war  with  England  on  account 
of  her  conduct  in  the  matter  of  the  great  Rebellion,  and  our  Atlantic  coast 
and  Long-Island  Sound  had  become  the  scene  of  naval  warfare :  how  would 
Hew  England  have  been  supplied  with  coal?  And,  without  coal,  what  would 
have  been  the  effect  upon  our  people?  And  to-day  no  new  or  better  avenues 
for  the  carriage  nf  coal  exists  from  the  mines  to  Hew  England  than  existed 
in  1863.  If  water-carriage  should  be  cut  off,  we  do  not  see  how  considerable 
inconvenience,  to  use  no  stronger  language,  could  be  avoided.  This  road 
runs  directly  to  the  coal-field;  has  an  entire  interior  communication  in  no 
way  affected  by  what  is  passing  on  the  water,  whether  obstructed  by  ice, 
storm,  or  war;  and  can  go  on,  day  by  day,  winter  and  summer,  supplying  all 
the  demands  of  our  people  for  that  indispensable'  article  of  personal  comfort 
and  industrial  success. 

Again:  should  foreign  navies  hover  on  our  coast,  and,  running  in  their 
swift  craft,  cut  away,  and  burn  or  destroy,  the  bridges  or  tracks  of  the  rail¬ 
roads  on  the  line  of  the  Sound,  to  prevent  the  sending  of  troops  and  muni¬ 
tions  of  war  to  any  place  they  might  design  to  attack,  here  lies  a  road  too 
far  in  the  interior  to  be  reached  by  them,  and  yet  so  near  the  coast,  that, 
with  the  north  and  south  roads  crossing  its  trunk  line,  every  place  of  any 
note  can  be  brought  within  a  very  few  hours  of  Hew  York  and  Boston;  and 
so  it  will  form  a  military  highway  for  coast-defence,  of  hundreds  of  miles  in 
extent.” 

We  will  not  quote  further  from  this  remarkable  Report ;  but  we 
do  advise  the  members  of  the  legislature  to  look  at  it  and  to  read 
for  themselves. 

However  carefully  guarded  the  bill  reported  by  the  Committee 
may  appear,  rest  assured  that  the  passage  of  the  proposed  bill 


1878.] 


HOUSE  —  No.  276. 


87 


will  involve  the  State  still  deeper  in  debt  and  in  trouble;  and, 
when  we  find  the  State  has  $10,000,000  invested,  the  cry  will 
surely  come  for  more  money,  more  aid,  —  we  must  build  or  complete 
the  Poughkeepsie  Bridge,  or  we  must  aid  the  railroads  wrest  of  the 
Hudson,  or  we  must  put  fresh  capital  from  the  State  treasury  into 
the  old  bankrupt  Erie  Railroad.  We  should  not  be  unduly  influ¬ 
enced  by  interested  parties,  whether  dealers  in  the  Berdell  bonds, 
or  paid  agents  and  officers  of  the  New-York  and  New-England  Rail¬ 
road.  We  believe  it  is  our  duty,  as  legislators,  to  say  “No”  to 
this  proposition.  If  we  must  lose  $3,600,000,  better  lose  it  than  to 
lose  $10,000,000.  But,  with  proper  management,  we  shall  get  some¬ 
thing  from  the  $3,600,000  ;  and  the  necessary  authority  should  be 
granted  to  the  Governor  and  Council  to  dispose  of  the  State’s  stock 
at  such  time  and  manner  as  shall  be  deemed  advisable  bjr  them. 
Therefore  we  trust  the  bill  proposed  by  a  majority  of  the  Commit¬ 
tee  will  not  become  a  law,  but  that  it  will  be  rejected  by  the  legis¬ 
lature. 

LEWIS  N.  GILBERT, 

Of  the  Senate. 

J.  N.  DUNHAM, 

Of  the  House. 


38  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


tHommontoealtl)  of  iUassacfyusetts. 


AN  ACT 

To  secure  the  Interests  of  the  Commonwealth  in  the 
New- York  and  New-England  Railroad. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives 
in  General  Court  assembled ,  and  by  the  authority  of  the 
same ,  as  follows : 

1  Sect.  1.  The  governor,  with  the  advice  and  con- 

2  sent  of  the  council,  shall  appoint  three  persons,  who 

3  shall  constitute  “  The  Board  of  Supervisors  of  the 

4  New- York  and  New-England  Railroad”  [and  who 

5  shall  hold  their  offices  for  the  terms  of  one,  two, 

6  and  three  years,  respectively,  from  the  dates  of  their 

7  respective  appointments.  The  governor  shall  in 

8  like  manner,  in  each  year  thereafter,  appoint  a  super- 

9  visor,  to  continue  in  office  for  the  term  of  three  years 

10  from  the  date  of  his  appointment.  In  case  of  any 

11  vacancy  occurring  in  said  board  by  resignation  or 

12  otherwise,  the  governor,  with  the  advice  and  consent 

13  of  the  council,  shall  appoint  a  supervisor  for  the 

14  residue  of  the  term ;  and  he  may,  in  like  manner, 

15  remove  any  of  said  supervisors.  The  compensation 

16  of  said  supervisors  shall  be  fixed  by  the  governor 

17  and  council,  which  compensation  shall  be  paid  by 


1878.] 


HOUSE  — No.  276. 


89 


18  said  railroad  company.  Said  supervisors  shall  be 

19  sworn  to  the  faithful  discharge  of  their  duties,  and 

20  shall  keep  a  true  record  of  then  doings  and  pro- 

21  ceedings,  and  shall  make  an  annual  report  thereof 

22  to  the  legislature.  Said  board  shall  have  the  con- 

23  trol  of  all  expenditures  made  in  accordance  with 

24  the  provisions  of  this  act ;  and  the  governor  is  hereby 

25  authorized,  on  the  application  of  said  railroad  com- 

26  pany,  approved  by  order  of  said  board,  to  draw  his 

27  warrant  on  the  treasurer  of  the  Commonwealth  for 

28  such  sums  as  may  be  required,  from  time  to  time,  to 

29  carry  out  the  provisions  of  this  act].  Said  board 

30  may  act,  by  a  majority  thereof,  at  any  meeting  of 

31  the  same  of  which  all  the  members  have  been  duly 

32  notified.  Said  supervisors  shall,  at  all  times,  have 

33  free  access  to  all  the  books  and  accounts  of  said 

34  railroad  company. 

1  Sect.  2.  The  treasurer  of  the  Commonwealth  is 

2  hereby  authorized  to  receive  from  said  New-York 

3  and  New-England  Railroad  Company  nine  million 

4  six  hundred  and  twenty-four  thousand  dollars  of  the 

5  bonds  of  said  company,  secured  by  its  mortgage  to 

6  the  Boston  Safe  Deposit  and  Trust  Company,  trus- 

7  tee;  and  is  -authorized,  with  the  consent  of  the  gov- 

8  ernor  and  council,  to  purchase  out  of  the  sums 

9  hereinafter  appropriated  three  hundred  and  seventy- 

10  six  thousand  dollars  of  bonds  now  outstanding  and 

11  secured  by  the  same  mortgage,  provided  said  bonds 

12  can  be  obtained  at  a  reasonable  price,  together  being 

13  ten  millions  of  dollars,  and  being  the  whole  issue  of 

14  bonds  authorized  to  be  issued  by  said  New-York  and 


40  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


15  New-England  Railroad  Company  by  chapter  two 

16  hundred  and  eighty-nine  of  the  acts  of  eighteen 

17  hundred  and  seventy-three,  approved  May  fifteen, 

18  eighteen  hundred  and  seventy- three,  and  concurrently 

19  authorized  by  chapter  five  hundred  and  fifty  of  the 

20  laws  of  eighteen  hundred  and  seventy-three  of  the 

21  state  of  New  York,  entitled  66  An  Act  to  extend 

22  the  time  for  the  completion  of  the  Boston,  Hartford, 

23  and  Erie  Railroad  by  the  New-York  and  New-Eng- 

24  land  Railroad  Company,”  approved  May  twenty-one, 

25  eighteen  hundred  and  seventy-three ;  and  by  the 

26  general  assembly  of  Connecticut,  by  an  act  approved 
2  7  May  twenty-nine ,  eighteen  hundred  and  seventy-three , 

28  entitled  “  An  Act  concerning  the  New- York  and 

29  New-England  Railroad  Company ;  ”  and  also  by  an 

30  act  passed  by  the  general  assembly  of  the  state  of 

31  Rhode  Island  at  its  May  session,  eighteen  hundred 

32  and  seventy-three,  entitled  “An  Act  concerning  the 

33  New- York  and  New-England  Railroad  Company:” 

34  and  the  treasurer  is  hereby  directed  to  hold  the  same, 

35  when  delivered  to  or  if  purchased  by  him,  as  se- 

36  curity  for  the  performance  of  the  agreements  here- 

37  inafter  referred  to. 

1  Sect.  3.  No  expenditure  whatever  shall  be  made 

2  under  this  act  until  an  agreement  shall  have  been 

3  executed  by  the  New-York  and  New-England  Rail- 

4  road  Company  to  the  Commonwealth  in  a  form 

5  approved  by  the  attorney-general  of  the  Common- 

6  wealth,  and  conditioned  that  the  said  railroad  com- 

7  pany  shall  [pay  to  the  Treasurer  of  the  Common- 

8  wealth,  on  the  first  day  of  January,  in  the  year  nine- 


1878.] 


HOUSE  — No.  276. 


41 


9  teen  hundred,  the  sum  of  h£x  million  dollars,  or  so 

10  much  thereof  as  shall  be  expended  under  the  pro- 

11  visions  of  this  act,  and  shall  further  pay  to  said  treas- 

12  urer  the  interest  on  all  sums  so  expended,  at  the  rate 

13  of  4ve  per  centum  per  annum,  such  payments  of  in- 

14  terest  to  be  made  semi-annually]  ;  and  that  said  rail- 

15  road  company  shall  pay  all  the  interest  that  may  fall 

16  due  after  the  first  warrant  shall  have  been  drawn  by 
*  17  the  governor  as  provided  in  the  first  section  of  this 

18  act,  -  and  thereafter  as  the  same  shall  fall  due,  on 

19  certain  scrip  heretofore  issued  by  the  Commonwealth, 

20  which  consists  of  five-per-cent  sterling  bonds  to  the 

21  amount  of  seven  hundred  and  forty-three  thousand 

22  six  hundred  pounds  sterling,  payable  in  London  in 

23  the  year  nineteen  hundred,  being  the  scrip  issued  for 

24  the  benefit  of  the  Boston,  Hartford,  and  Erie  Railroad 

25  Company;  nor  until  said  New- York  and  New-Eng- 

26  land  Railroad  Company  shall  deliver  to  the  treasurer 

27  of  the  Commonwealth,  as  security  for  the  perform- 

28  ance  of  the  conditions  of  said  agreement,  the  nine 

29  million  six  hundred  and  twenty-four  thousand  dollars 

30  in  the  bonds  referred  to  in  section  two  of  this  act ; 

31  and  the  said  outstanding  three  hundred  and  seventy- 

32  six  bonds,  if  possession  thereof  is  acquired  by  the 

33  state,  as  provided  in  section  two  of  this  act,  shall  by 

34  the  terms  of  said  agreement  be  held  as  a  part  of 

35  the  said  security  by  the  Commonwealth. 

1  Sect.  4.  No  expenditure  whatever  shall  be  made 

2  under  this  act  until  an  agreement  shall  have  been 

3  executed  by  the  New- York  and  New-England  Rail- 

4  road  Company  to  the  Commonwealth,  by  authority  of 


42 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


5  the  stockholders  and  directors  thereof,  at  meetings 

6  duly  held  for  the  purpose,  in  a  form  approved  by 

7  the  attorney-general  of  the  Commonwealth  ;  that  the 

8  said  supervisors  shall  be  notified  by  the  clerk  of  said 

9  company  of  all  meetings  of  the  directors  of  said 
LO  company  by  the  same  notice  as  that  given  to  the 

1 1  directors  ;  and  that  said  supervisors  may  be  present 

12  at  all  meetings  of  the  directors  of  the  company; 

13  and  further  conditioned,  that  no  vote  or  proceeding 

14  of  the  directors  of  said  company  affecting  the  ex- 

15  penditure  of  the  money  herein  appropriated,  or  the 

16  security  to  be  pledged  therefor,  shall  be  valid  or  have 

17  any  force  or  effects  said  board  of  supervisors  shall, 

18  upon  the  day  of  any  meeting  at  which  the  -same 

19  shall  have  been  passed  [or  on  the  next  subsequent 

20  day],  notify  in  writing  the  directors  or  the  president  of 

2 1  said  company  of  their  dissent  from  any  such  vote  or 

22  proceeding ;  and  conditioned  further,  that  the  de- 

23  posit  of  bonds,  referred  to  in  section  two  of  this 

24  act,  shall  be  pledged  and  held  as  security  also  for 

25  the  performance  of  the  agreement  referred  to  in  this 

26  section,  and  that  the  said  bonds  shall  be  thereupon 

27  absolutely  forfeited  to  the  Commonwealth,  to  the 

28  extent  of  paying  its  said  indebtedness  incurred  on 

29  account  of  said  railroad  company,  in  case,  by  any  ac- 

30  tion  of  said  railroad  company  or  otherwise,  the  terms 

31  of  this  agreement  shall  be  in  any  manner  impaired. 

32  or  there  shall  be  any  violation  of  the  provisions  of 

33  this  act  without  the  consent  of  the  Commonwealth. 

1  Sect.  5.  Said  board  of  supervisors  is  hereby 

2  directed,  as  soon  as  possible  after  its  appointment, 


1878.] 


HOUSE  — No.  276. 


48 


3  upon  the  application  of  the  New- York  and  New- 

4  England  Railroad  Company  [and  with  the  consent 

5  of  the  governor  and  council],  to  apply  and  expend 

6  of  the  amounts  hereinafter  appropriated  the  sum  of 

7  four  million  dollars,  or  so  much  thereof  as  may 

8  be  necessary  to  the  payment  and  discharge  of 

9  the  indebtedness  of  said  company,  including  the 

10  note  for  two  hundred  and  fifty  thousand  dollars 

11  of  the  said  New -York  and  New -England  Rail- 

12  road  Company  now  held  by  the  Commonwealth, 

13  and  to  the  payment  and  discharge  of  all  exist- 

14  ing  mortgages  and  other  debts  which  are  now 

15  a  lien  or  encumbrance  upon  the  property  of  the 

16  New- York  and  New-England  Railroad  Company, 

17  including  all  encumbrances  -  upon— -tire — Hartford, 

18  Providence,  and  EHhkiH — Railroad; — SIT  called,  to 

19  the  end  that  the  New- York  and  New-England 

20  Railroad  Company  may  perfect  its  title  to  and 

21  acquire  the  actual  possession  of  all  parts  of  its  road, 

22  and  hold  the  same  subject  only  to  its  mortgage  to  the 

23  Boston  Safe  Deposit  and  Trust  Company,  trustee, 

24  hereinbefore  referred  to.  Any  assignments  or  re- 

25  leases  of  any  of  said  mortgages,  and  all  conveyances 

26  or  instruments  in  writing,  made  for  the  purpose  of 

27  perfecting  the  title  of  the  said  New- York  and  New- 

28  England  Railroad  Company  as  aforesaid,  shall  be 

29  made  to  the  said  New-York  and  New-England  Rail- 

30  road  Company  ;  but  said  supervisors  shall  stamp  upon 

31  all  bonds  or  other  evidences  of  debt,  at  the  time  of 

32  payment  thereof,  the  words,  “  Held  by  the  New-York 

33  and  New-England  Railroad  Company  for  security  of 

34  title  only ;  not  transferable :  ”  and  the  same  shall 


44 


NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr. 


35  never  be  transferable  by  said  company.  And  said 

36  board  of  supervisors  are  further  directed,  upon  the 

37  application  of  said  railroad  company  [and  with 

38  the  consent  of  the  governor  and  council],  to  apply 

39  and  expend  of  the  amounts  hereinafter  appro- 

40  priated  the  sum  of  -two,, million  dollars,  and  any 

41  residue  of  said  sum  of  four  million  dollars  not  re- 

42  quired  for  the  purposes  aforesaid,  or  so  much  thereof 

43  as  may  be  necessary,  to  the  completion  or  building 


44  of  said  ^STew-York  and  New-England  Rajlrqad  fipm 

45  Waterbury -in  Connecticut  to  the  Hudson  River,  and 


46  to  completing,  equippin gr_an& -puttingJmproper  con- 

47  dition  for  use,  a  through  dine  of  railway  from  Boston 

48  and  Providence  to  the  Hudson  River  ,  provided,  how- 

49  ever ,  that  no  portion  of  said  4we  milli-on-doRars  shall 

50  be  expended  until  contracts  shall  have  been  made  by 

51  said  railroad  companyMvith  responsible  contractors, 

52  approved  by  said  board  of  supervisors  [and  by  the 

53  governor  and  council],  for  the  completion  of/thp  lines 

&  &  -m hm  ■  ■ 


54  of  road  from  AYaterbuky  to  the  Hudson  Riveiy  within 

55  a  period  of  one  year£ from ,  the  date  thereof,  and  at 

56  a  cost  not  exceeding  said  two-million  dollars,  Zb  ✓. M 


1 

2 

3 

4 

5 

6 

7 

8 
9 


Sect.  6  For  the  purpose  of  securing  the  inter¬ 
ests  of  the  Commonwealth  in  the  New- York  and 
New-England  Railroad  by  providing  for  the  comple¬ 
tion  thereof  to-lhe-44-u4son  River,  and  the  removal 
of  all  encumbrances  upon  the  road,  except  that  to 
be  held  by  the  Commonwealth  as  aforesaid,  the 
treasurer  of  the  Commonwealth  is  hereby  authorized 
and  directed  to  issue  scrip  or  certificates  of  indebt¬ 
edness  in  the  name  and  behalf  of  the  Common- 


1878.] 


HOUSE  — No.  276. 


45 


wealth  to  [such!  van  amount  [as  will  realize  a  sum] 


10 

11  not  exceeding  -six:,  millions  of  dollars,  said  scrip  to 

12  be  redeemable  January  first,  in  the  year  nineteen 

13  hundred,  with  interest  warrants  attached  at  the 

14  rate  of  4ive-  per  centum  per  annum,  and  to  be 

15  made  payable  in  such  places  and  in  such  manner 

16  as  the  governor  and  council  shall  decide.  All 

17  said  scrip  shall  be  countersigned  in  such  manner 

18  as  the  governor  and  council  shall  designate,  and 

19  the  faith  and  credit  of  the  Commonwealth  is  here- 

20  by  pledged  for  the  redemption  thereof ;  and  the 

21  sum  received  from  the  issue  and  sale  of  said  scrip 

22  is  hereby  appropriated  for  the  purposes  expressed  in 

23  this  act.  All  said  scrip  until  the  sale  thereof,  and  all 

24  the  proceeds  derived  therefrom  until  disbursed  in 

25  accordance  with  the  provisions  of  this  act,  shall  re- 

26  main  in  the  custody  of  the  treasurer  of*  the  Com- 

27  mon\vealth.  The  governor  and  council  are  hereby 

28  authorized  to  take  all  necessary  measures  for  the 

29  preparation  of  said  scrip  or  certificates  of  indebted- 

30  ness,  and  for  the  sale  or  negotiation  thereof  from 

31  time  to  time,  with  authority  to  expend  such  sums 

32  of  money  as  may  be  necessary  for  the  purpose : 

33  provided ,  however ,  that,  before  any  scrip  shall  be  issued 

34  [or  any  appointment  or  expenditure  made]  under  the 

35  provisions  of  this  act,  it  shall  appear  to  the  satis- 

36  faction  of  the  governor  and  council  that  by  said 

37  appropriation  and  expenditure  the  state  will  secure 

38  the  removal  of  all  liens  or  encumbrances  on  the 

39  entire  line  of  road  from-  Keeton  andr-J^revideneG  te" 

40  the-4Iudsen  River,  saving  only  the  mortgage  to  the 

41  Boston  Safe  Deposit  and  Trust  Company  liereinbe- 


46  NEW-YORK  AND  NEW-ENGLAND  R.R.  [Apr.78. 


42  fore  referred  to,  and  will  ,  further,  secure  the  com- 


43  pletion  of  said  road  4romA?¥^4erh4ry-  in Coimeetieut 

44  -t-o  theTf  udsonH4iwer ,  so.  that  the  New- York  and  New- 

45  England  Railroad  Company  will  have  a  perfect  title 

46  to  and  acquire  the  actual  possession  of  said  entire 

47  line  of  road ,  and  that  said  Railroad  Company  will 

48  be  able  to  make  the  payments  referred  to  in  section 

49  three  of  this  act ;  and  that  said  Railroad  Company 

50  can  make  valid  and  binding  the  agreement  set 

51  forth  in  section  four  of  this  act, 

1  Sect.  %.  This  act  shall  take  effect  upon  its  pas- 


^  r 


f  * 


^  SL  /AX^yi 


Y 


APPENDIX. 


.  . 


■f 

' 


1878.] 


APPENDIX. 


49 


HEARING 

BEFORE  THE  COMMITTEE  OH  RAILROADS  OF  THE  MASSACHUSETTS 
LEGISLATURE,  ON  THE  REPORT  OF  THE  JOINT  SPECIAL  COM¬ 
MITTEE  OF  lST"?,  ON  THE  NEW-YORK  AND  NEW- 
ENGLAND  RAILROAD. 


Boston,  Feb.  8,  1878. 

The  Chairman.  The  Committee  are  ready  to  continue  the 
hearing  on  the  Report  of  the  Committee  on  the  New- York  and 
New-England  Railroad.  The  purpose  of  the  hearing  this  morning 
is  to  listen  to  the  views  of  the  members  of  the  Committee  who 
presented  this  Report.  We  desire,  for  our  benefit  and  instruction, 
to  get  the  views  of  the  individual  members  of  the  Committee  ;  and 
should  be  pleased  to  hear  from  Mr.  Stone. 

Mr.  E.  F.  Stone  of  Newburyport,  member  of  the  Committee  N 
of  the  New-York  and  New-England  Railroad  of  1877.  I  was  one 
of  the  Committee  appointed  last  y^ear  to  consider  what  action  it 
may  be  expedient  for  the  State  to  take  in  relation  to  its  invest¬ 
ments  in  the  stock  and  securities  of  the  New-York  and  New- 
England  Railroad,  and  did  not  happen  to  concur  with  my  associ¬ 
ates.  I  was  one  that  dissented  from  the  opinion  of  the  majority. 

I  supposed  that  the  Committee  might  prefer  to  hear  from  the  ma¬ 
jority  of  the  Committee  to  know  the  reasons  which  influenced  them 
to  report  as  they  did.  But  as  it  may  be  said  that  their  reasons 
may'  be  found  in  the  Report,  and  as  I  simply'  dissented,  without 
giving  reasons  for  my  dissent,  if  the  Committee  desire  to  know  why 
I  did  not  quite  agree  with  the  Committee,  I  do  not  object  to  stating 
why  I  did  not. 

I  felt,  Mr.  Chairman l  as  if  it  was  very  desirable  if  some  scheme 
could  be  devised  to  save  the  State  from  loss,  which  clearly  would 
occur  in  the  event  of  things  going  on  as  they  are  now  ;  and  the 
State  has  to  pay’,  as  it  will  have  to  pay,  the  annual  interest  of  one 
hundred  and  eighty  thousand  dollars  a  year  until  the  termination 
of  the  loan,  being  some  twenty-two  or  twenty-three  years.  As 
you  know,  gentlemen,  the  principal  is  provided  for.  The  princi¬ 
pal  of  the  loan  of  thirty-six  hundred  thousand  dollars  made  by'  the 
State  is  provided  for ;  but  there  is  no  provision  for  thu  payment 


50 


APPENDIX.  [Apr. 

of  interest.  The  interest,  being  an  annual  expense,  will,  in  the 
aggregate,  amount  to  a  very  large  sum.  I  have  not  computed  it 
personalty ;  but  I  asked  Mr.  Goodspeed,  the  accountant  of  the 
Railroad  Commissioners,  to  compute  it.  The  simple  computation, 
so  much  a  year  for  the  years  now  to  elapse,  is  a  very  easy  thing  to 
reckon  ;  but  the  entire  amount  that  will  have  to  be  paid  by"  the 
State  is  not  far  from  eight  millions  of  mone3T,  computing  the 
annual  pa3Tments,  with  interest  on  those  payments  from  year  to 
year. 

That  is  a  very’  considerable  sum  ;  and  the  question,  of  course, 
which  ought  to  be  considered  by  the  legislature  is,  whether  any  ex¬ 
pedient  can  be  found  b3r  which  that  can  be  saved.  Now,  it  was 
represented  last  year  to  the  Committee  on  Finance  by’ the  president 
of  the  New-York  and  New-England  Road  —  The  matter  originated 
somewhat  in  this  way :  The  president  of  the  New-York  and  New- 
England  Railroad  Company,  in  an  interview  with  the  Finance  Com¬ 
mittee  last  y’ear,  stated  in  brief  what  the  condition  of  this  road 
was,  and  the  condition  of  the  State’s  interest.  He  appeared  to 
have  a  very  strong  feeling  that  there  was  considerable  value  in 
this  property',  and  he  thought,  with  proper  management,  the  State 
might  save  the  sum  which  it  had  invested  in  it.  He  seemed  to  be 
so  earnest  about  it,  seemed  to  be  so  thoroughty  sincere  and  honest 
in  his  conviction  as  to  what  was  best,  that  he  made  considerable 
impression  upon  the  Committee  on  Finance,  certainty  he  did  upon 
me ;  and  we  reported  an  order  to  the  effect  that  it  was  expedient 
for  the  State  to  make  some  inquiry"  iyto  the  value  of  this  road, 
and  w’liether  some  scheme  might  not  be  devised  by  which  the 
property  might  be  saved.  In  pursuance  of  that  order  the  Com¬ 
mittee  was  appointed  that  served  through  the  recess. 

It  appeared  in  the  hearings  that  this  property"  had  been  improv¬ 
ing,  manifestly  improving,  for  a  series  of  years ;  that  it  has  suf¬ 
fered  a  great  deal  from  mismanagement  in  times  past,  but  for 
the  last  few  years  it  has  been  managed  wisety ;  that  the  business 
Of  the  road  has  increased.  Although  the  expenses  of  administra¬ 
tion  were  considerably’  more  than  the  Committee  thought  they 
ought  to  be,  yet  it  was  not  denied  that  the  .general  administration 
of  the  road  was  satisfactory,  and  that  the  business  of  the  road 
had  very’  considerably"  increased.  Upon  the  evidence  which  ap¬ 
peared,  and  statements  made,  a  comparison  of  the  reports,  and 
conference  with  the  officers  of  the  road,  and  conferring  with  other 
parties  as  to  the  value  of  the  property,  —  the  trustees  of  the  Hart¬ 
ford,  Providence,  and  Fishkill  Road,  — and  from  all  the  sources  of 
information  which  the  Committee  were  able  to  obtain,  I  think  it 
Was  generally  felt,  on  the  part  of  the  Committee,  that  the  property 


1878.] 


APPENDIX. 


51 

had  considerable  value.  I  for  one  (and  I  don’t  know  :  I  think  the 
Committee  agreed  in  that) ,  —  I  for  one  thought  the  property  was  of 
such  value  that  it  was  good  security,  ample  secnrtty,  for  a  consider¬ 
able  loan  of  money  in  addition  to  the  present  loan  upon  the  road. 
So  I  personally  thought  it  was  possible  to  make  an  arrangement 
with  the  directors  of  this  road,  with  the  stockholders  of  this  road, 
b}T  which  the  State  could  lend  to  this  enterprise  money  enough  to 
relieve  it  from  its  present  indebtedness,  and  put  it  in  a  condition 
where  it  could  do  a  good  business.  Upon  that  question  the  Com¬ 
mittee  differed.  In  my  judgment,  after  a  careful  comparison  of 
different  sources  of  revenue,  after  a  careful  estimate  of  the  value 
of  the  road,  I  thought  the  property  was  ample  security,  as  it  now 
stands,  for  a  loan  of  five  millions  of  money.  I  have  no  doubt, 
whatever,  that  the  property  as  now  administered  in  its  present 
condition  is  good  security  for  five  millions  of  mone3T.  And,  being 
of  that  opinion,  my  own  disposition  was  to  make  a  loan  to  this 
railroad  company,  of,  say,  four  millions  of  mone3r,  upon  the  present 
property,  upon  the  road  as  it  is  now  established  ;  not  attempting 
to  deal  with  the  question  as  to  what  the  income  might  be  with  the 
extension  of  the  road  to  the  Hudson  River. 

And  my  desire  was,  —  and  I  might  sa3T  here,  gentlemen,  that  that 
proposition  which  is  stated  in  the  Report  I  suppose  substantially 
originated  in  me,  for  which  of  course,  as  has  been  said,  the  rail¬ 
road  company  is  in  no  respect  responsible,  —  my  proposition  was 
to  make  a  loan ;  but  the  details  were  not  worked  out  carefully, 
because  it  w'as  not  considered  on  the  part  of  the  Committee  a  wise 
thing  to  do.  My  feeling  was,  and  my  desire  was,  to-  make  a  loan 
to  this  company,  upon  the  present  road,  of  four  millions  of  mone3', 
upon  the  ground  that  the  present  property,  judging  by  the  past, 
taking  the  last  three  3’ears  as  a  basis,  —  that  the  present  property  is 
ample  securit3r  for  that  amount.  And  inasmuch  as  the  propert3', 
as  it  has  been  administered  within  the  last  three  3*ears,  under  a 
condition  the  most  unfavorable  for  railroad  management,  under 
the  bad  state  of  trade,  at  a  time  when  railroad  property  was 
generally  very  unprofitable  under  a  bad  internal  condition,  with 
the  road  in  the  hands  of  two  or  three  different  parties,  and  of 
course  more  or  less  conflict  of  interest,  more  or  less  conflict  of 
polic3r,  and  more  or  less  unnecessary  expense  incident  to  the 
administration  of  a  twofold  road,  for  this  road  is  substantially 
a  twofold  road,  from  Boston  to  Willimantic  on  the  one  side,  and 
from  Providence  to  Hartford  on  the  other,  and  under  two  different 
managements,  —  under  such  conditions,  and  under  circumstances 
very  unfavorable,  the  trade,  the  actual  doings,  of  the  road  for  the 
last  three.  3Tears,  I  think,  justifies  a  valuation  of  five  millions  of 


52 


APPENDIX. 


[Apr. 


money.  And,  being  of  that  opinion,  I  was  willing  to  make  a  loan 
to  that  amount,  believing  that  by  such  a  loan  the  road  would  bo 
relieved  from  its  embarrassments,  put  under  one  administration, 
and  in  a  condition  to  develop  its  business,  and  to  extend,  if  neces¬ 
sary,  its  road  to  the  Hudson  River. 

Now,  in  regard  to  the  soundness  of  that  judgment,  as  to  whether 
or  not  the  property  is  worth  five  millions  of  money.  That  is 
based  upon  the  actual  results  of  the  road  as  they  appear  from  the 
Report  of  the  Commissioners.  This  Report,  which  was  made  by 
the  Railroad  Commissioners  some  years  ago  (if  you  examine  that 
with  any*  care,  you  will  find  that  the  Report  is  quite  trustworthy', 
and  is  not  prepared  in  the  interests  of  the  railroad  company :  it 
is  manifestly  prepared,  manifestly  written,  with  a  view,  on  the  part 
of  the  Railroad  Commissioners,  of  protecting  the  interests  of  the 
State),  —  there  is  nothing  to  be  found  in  that  Report  which  would 
give  any  person  an  unjust  estimate  of  the  value  of  that  property : 
on  the  contrary,  if  any7  thing,  there  is  manifestly  extreme  care  on 
the  part  of  the  Commissioners,  of  whoever  prepared  the  Report.  I 
suppose  Mr.  Adams  wrote  it.  It  was  evidently  written  veiy  care¬ 
fully  in  order  not  to  convey  to  the  State  the  idea  that  the  prop¬ 
erty  has  any  value  beyond  what  in  my  judgment  it  clearly  had. 
So  he  manifestly  was  quite  careful  not  to  give  any  opinion,  or  to 
give  any  impression,  which  would  not  be  fully  sustained  by  the 
facts.  Now,  judging  from  that  exhibit  made  by  him,  it  is  very 
clear  that  the  property  between  Hartford  and  Providence  and 
Fishkill  is  worth  considerable  more  than  the  mortgage  upon  it. 
It  is  safe  to  say*,  —  I  have  not  looked  over  the  figures  recently,  and 
therefore  cannot  state  with  the  accurateness  I  should  like  to,  — 
it  is  safe  to  say7  that  the  property  of  the  Hartford,  Providence,  and 
Fishkill  Railroad,  is  certainty  worth  one  hundred  thousand  dollars 
a  year  more  than  the  interest  upon  the  encumbrances.  We 
found  when  we  were  in  Hartford  (we  went  there  specialty  to 
have  a  conference  with  the  trustees  of  the  road.  That  road  is 
managed  by  Mr.  Bartholomew  mainly :  he  is  the  managing  trus¬ 
tee,  and  a  very  competent  man), — we  were  clearly  satisfied  in 
going  there,  that  that  piece  of  property  was  very  valuable,  —  that 
part  of  the  road  between  Hartford  and  Providence.  When  in 
Hartford,  we  were  told  by'  Mr.  Bartholomew  and  Mr.  Day' — both 
said  that  if  that  piece  of  property  could  be  purchased  for  two 
millions  of  moneys  free  and  clear,  if  they'  could  get  a  good  title 
to  that  property,  they7  would  guarantee  that  they  could  raise  the 
money  in  a  very  few  days,  and  be  happy'  to  do  it,  to  buy  that 
piece  of  property,  and  would  consider  it  a  very  valuable  purchase, 
and  worth  a  great  deal  more  than  that.  I  don’t  think  there  was 


1878.] 


APPENDIX. 


53 


any  doubt  on  the  part  of  the  Committee  that  that  piece  of  prop¬ 
erty  is  worth  a  good  deal  more  than  the  encumbrances  upon  it ; 
so  that  upon  that  piece  of  property  I  suppose  there  is  considera¬ 
ble  margin  on  a  valuation  of  two  millions  of  dollars,  which,  I 
think,  is  a  low  valuation. 

When  you  come  to  the  other  road  :  on  the  New-York  and  New- 
England  Railroad,  according  to  the  Report,  which  I  suppose  you 
have,  the  amount  of  the  net  earnings  of  the  road  appear  to  have 
been  $184,383.  These  figures  here  are  more  satisfactory  than 
an}’  I  could  give  you  from  memory.  On  the  ninth  and  tenth 
pages  is  the  statement  of  the  Committee  in  regard  to  the  value 
of  the  property,  which,  with  one  or  two  exceptions,  does  not  differ 
much  from  the  opinion  which  I  have  held  as  to  its  value. 

On  the  bottom  of  the  ninth  page  the  Committee  say,  “  In  the 
Report  of  the  New-York  and  New-England  Railroad  for  the  year 
ending  Sept.  30,  1877,  the  net  earnings  appear  to  have  been, 
excluding  interest  paid,  $184,383.” 

Then  the  net  earnings  of  the  other  road,  the  Hartford,  Provi¬ 
dence,  and  Fishkill,  for  the  year  1876,  are  stated  to  have  been 
$166,594.  I  set  it  at  a  hundred  thousand  dollars:  that  year  it 
was  considerable  more.  That  is  on  the  tenth  page  of  the  Report. 
I  refer  to  the  Committee’s  Report  of  last  year,  not  to  the  Commis¬ 
sioners’  Report.  I  am  dealing  with  the  Report  of  the  Committee 
made  at  this  session  of  the  legislature. 

Mr.  Gilbert.  You  say  the  net  earnings  were  a  hundred  and 
eighty-four  thousand  dollars.  What  became  of  that  money? 
Was  any  portion  of  that  money  used  to  pay  any  debt  incurred 
during  last  year? 

Mr.  Stone.  A  portion  of  the  money  was  applied,  in  part,  to 
the  payment  of  rent,  and  for  expenses  incurred,  I  suppose,  in 
repairs  and  improvements  upon  the  road.  That  is  the  $184,000. 

Mr.  Baldwin.  That  was  exclusive  of  rent.  There  is  a  mis¬ 
take  there  in  the  figures.  The  rent  was  deducted  there,  although 
it  was  afterwards  deducted  again  on  the  next  page.  That  was 
deducted  from  the  earnings,  and  left  $184,383  as  the  net  earnings 
for  the  year. 

Mr.  Gilbert.  What  I  want  to  know  is,  Was  that  hundred  and 
eiglity-four  thousand  dollars^  the  net  profit  of  last  year,  after 
paying  the  debts  incurred  last  year  of  any  nature  whatever? 

Mr.  Baldwin.  It  was,  after  paying  rent,  taxes,  cost  of  steel 
rails,  &c. 

Mr.  Tucker.  The  rent  seems  to  be  stated  at  seventy  thousand 
in  one  place ;  and  here  it  is  fifty-five  thousand#  What  is  the 
reason  they  differ? 


54  APPENDIX.  [Apr. 

Mr.  Baldwin.  I  did  not  know  there  was  any  other  statement 
than  the  fifty-five  thousand. 

Mr.  Stone.  I  believe  that  was  owing  to  this  ;  I  think  seventy 
thousand  has  been  paid  at  some  period ;  but  the  rate  has  been 
reduced.  Isn’t  that  so,  Mr.  Hart? 

Mr.  Hart.  Yes,  sir,  the  rent  has  been  reduced,  and  will  be 
less  next  year,  because  we  have  made  arrangements  to  have  it 
considerable  less. 

Mr.  Stone.  What  I  wish  to  call  the  attention  of  the  Committee 
to,  is  the  value  put  upon  this  property  by  the  majority  of  the  Com¬ 
mittee.  They  seem  to  admit  that  the  net  earnings  of  the  road 
for  the  year  1877  were  $184,383  ;  and  the  earnings  of  the  other 
branch  of  the  road  were  $166,594;  together  making  the  earn¬ 
ings  of  both  roads  amount  to  $350,977.  And  the  payments  they 
said  would  be  as  follows  :  — 

Interest  on  5,500,000  bonds  pledged  to  State  .  .  $385,000 

Rent  of  land  at  Boston,  about  ....  55,000 

Supposing  this  arrangement  was  made  as  contemplated,  the  lia¬ 
bility  of  the  road  would  be  as  stated,  except  that  the  $55,000 
are  already  deducted.  The  $55,000  rent  of  land  was  already 
deducted  in  computing  the  amount  of  the  net  earnings. 

The  Committee  make  the  liabilities  of  the  road,  including  inter¬ 
est  upon  the  loan,  and  rent  of  land,  $440,000,  as  the  total  annual 
payments  to  be  made  by  the  railroad  compan}\  From  that  the 
Committee  deduct  $350,997,  which  is  the  net  income  of  the  road 
after  the  rent  has  already  been  deducted  ;  so  that  the  $55,000 
should  not  have  been  added  to  the  $385,000,  and  the  $350,000 
should  have  been  taken  from  the  $385,000,  'which  would  leave  a 
balance  of  $35,000. 

Then,  in  addition  to  that,  there  is  an  error  here  which  I  have 
observed:  I  don’t  know  that  I  can  point  it  out  to  the  Committee 
at  this  time.  There  is  another  error  in  making  up  the  debt  of 
the  road  on  page  9.  I  find  that  the  majority  of  the  Committee  in 
computing  that  amount  have  estimated  the  debt  of  the  road  as 
including  all  their  liabilities,  and  have  credited  nothing  for  prop¬ 
erty,  which,  to  a  large  extent,  was  available  for  the  payment  of 
those  debts.  Of  course,  as  3*011  will  perceive,  gentlemen,  if  the 
road  is  to  be  charged  with  the  floating  debt  of  $704,550,  there 
should  be  credited  the  property  which  is  available  for  the  paj’ment 
of  those  debts. 

Mr.  Bird.  Such  as  what? 

Mr.  Baldwin.  I  can  explain  that  because  I  have  the  items 
here  in  the  margin  of  the  Report.  Three  of  the  items  are  made  up 
by  bills  payable  for  supplies.  That  is  balanced  by  supplies  on 


1878.] 


APPENDIX. 


55 


hand  $54,000.  Balances  due  connecting  roads,  $23,000,  is  bal¬ 
anced  by  balances  due  from  connecting  roads  $25,000,  which  is 
$2,000  more  than  is  due. 

Mr.  Stone.  Mr.  Chairman,  if  3*011  have  with  3*011  the  Second 
Annual  Report  to  the  Stockholders,  for  December,  1877,  3*011  will 
find  liy  looking  at  that  exactly  how  the  $704,550  is  made  up.  If 
you  will  look  at  the  Report  of  the  general  balance-sheet  of  the  Com¬ 
mittee,  3*ou  will  find  that  the  $704,550  was  made  up  of  a  number 
of  items,  —  first-mortgage  seven-per-cent  bonds,  notes  pa3*able, 
bills  payable  for  supplies,  balances  due  connecting  roads,  cash 
receipts ;  making  in  all  $704,550.  And,  being  made  up  of  those 
items,  of  course  the  corresponding  items  on  the  other  side  of  the 
account  should  be  given  as  assets,  as  tlie3r  are  available  for  the 
pa3*inent  of  some  of  those  items.  Balances  due  connecting  roads, 
for  instance,  twent3*-three  thousand  dollars ;  on  the  other  side 
there  is  balances  due  from  connecting  roads  twent3*-five  thousand 
dollars,  —  more  than  enough  to  offset  it.  So  in  regard  to  bills 
payable  for  supplies. 

So  that  account,  that  statement  which  w*as  made  b3*  the  Commit¬ 
tee  in  respect  to  the  value  of  the  road  as  judged  by  the  receipts 
and  expenditures,  needs  to  be  corrected.  And  the  corrections  I 
think  3*ou  will  find,  on  a  careful  examination,  will  be  in  favor  of 
the  road. 

Mr.  Bird.  I  should  like  to  ask  Mr.  Baldwin  what  makes  up 
that  one  hundred  and  eiglit3*-four  thousand  dollars,  if  the  balances 
due  from  other  roads  is  not  a  part  of  it.  If  3Tou  put  them  in  the 
available  assets,  3*011  must  take  them  out  of  the  profits :  3*ou  can’t 
take  them  out  twice. 

Mr.  Baldwin.  I  understand  the  making  up  of  those  items  is  a 
mere  matter  of  book-keeping  :  the  account  is  made  up,  and  balance 
struck,  to  show  what  the  condition  is  at  that  time.  If  the  balance 
due  from  connecting  roads  is  more  than  the  balance  due  connect¬ 
ing  roads,  we  should  be  credited  with  the  difference. 

Mr.  Bird.  How  about  balances  due  connecting  roads? 

Mr.  Clark.  Balances  due  connecting  roads  are  also  charged. 

Mr.  Baldwin.  Those  are  not  debts  which  we  must  have  money 
to  pay  ;  and  must  not  be  deducted. 

Mr.  Stone.  The  rent  of  land  in  Boston  was  deducted  twice  by 
the  Committee.  The  debt  and  liabilities  of  the  road  are  given, 
including  the  rent,  and  then  3*011  deduct  the  income  after  the  rent 
has  been  taken  out. 

Mr.  Bird.  I  don’t  like  to  interrupt  3*011. 

Mr.  Stone.  I  want  to  be  interrupted  as  to  a  matter  of  cor¬ 
rection.  I  prefer  to  be  corrected  now,  if  you  will  tell  me  where 


APPENDIX. 


56 


[Apr. 


the  error  is  in  my  statement.  As  I  understand  it,  in  obtaining 
that  result  there  the  rent  is  already  taken  out. 

Mr.  Hart.  The  rent  and  taxes. 

Mr.  Stone.  Am  I  not  light? 

Mr.  Bird.  No  :  you  are  wrong.  I  will  wait  till  my  turn  comes. 

Mr.  Stone.  Mr.  Bird  seems  to  think  I  am  mistaken  about  it. 
Possibly  I  am.  He  prefers  to  take  his  own  time,  and  I,  of  course, 
will  not  quarrel  with  him  about  that. 

Now,  the  scheme  is  substantially  this :  That  the  State  should 
loan  to  the  road  a  sum  of  money  upon  what  they  believe  to  be  ample 
security,  by  which  they  will,  in  effect,  indemnify  themselves  for  the 
loss  which  they  have  made,  and  which  they  will  hereafter  make,  by 
reason  of  the  previous  loan,  and  purchase  of  stock  ;  which  amounts 
to  the  difference  of  interest  between  what  the  State  will  have  to 
pay  and  what  will  be  paid  the  State  by  the  road. 

That  is  the  proposition,  Whether  it  is  not  possible  to  effect  a 
loan  with  the  Company  upon  terms  which  will  give  us  such  an  ad¬ 
vantage  as  compared  with  the  terms  upon  which  we  can  hire  the 
money ;  whether  the  difference  between  the  interest  we  pay  and 
the  interest  the}7  pay  us  will  not  enable  us  to  fully  indemnify  ns 
for  the  amount  we  have  already  expended,  and  protect  us  against 
the  interest  which  we  will  have  to  pay  hereafter.  I  believe  that  is 
possible  ;  and  I  believe  it  is  possible  without  any  considerable  risk 
to  the  State.  Dealing  with  this  question  purely  as  a  matter  of 
business,  with  no  desire  to  help  this  road,  with  no  desire  to  de¬ 
velop  the  resources  of  the  State,  but  simply  as  a  question  of  busi¬ 
ness,  as  a  question  which  should  address  itself  to  us  as  business¬ 
men  having  an  investment  in  this  road  of  thirty-six  hundred  thou¬ 
sand  dollars,  —  whether  it  is  not  possible  to  devise  a  scheme  by 
which  we  can  be  protected  from  any  loss.  That  seems  to  me  the 
only  question  which  is  before  the  legislature  at  this  time.  I  deal 
with  it  entirely  as  a  question  of  business  ;  and  an}’  considerations 
which  may  be  urged  in  respect  to  the  policy  of  the  State  as  to  de¬ 
veloping  its  business,  &c.,  I  consider  entirely  incompetent,  and 
foreign  to  this  question  in  its  present  aspect.  And,  looking  at  it 
purely  as  a  question  of  business,  I  hold  that  it  is  possible  to  pro¬ 
tect  the  State  from  this  loss. 

Now,  if  this  is  done,  if  this  loan  is  made,  then  this  property  is 
put  upon  a  much  better  footing  than  it  is  to-day.  It  is  perfectly 
safe  to  say,  that,  if  the  road  can  earn  the  interest  on  five  millions, 
and  has  been  earning  that  amount,  it  is  morally  certain,  that,  in 
the  future,  it  will  earn  more  than  that  interest,  being  better  situ¬ 
ated  than  it  is,  and  better  able  to  do  a  larger  and  more  profitable 
business. 


1878.] 


APPENDIX. 


57 


In  respect  to  the  extension  to  the  Hudson  River :  we  are  not 
responsible  for  that.  We  stop  upon  the  road  that  is  established. 
We  say,  that  in  the  event  of  their  going  to  the  Hudson  River,  or 
not  going,  we  have  good  security  for  our  loan  ;  for,  if  they  go  to 
the  Hudson  River,  it  is  morally  certain  that  such  extension  cannot 
seriously  prejudice  the  value  of  our  security.  It  is  the  judgment 
of  men  in  Hartford,  and  everybody  that  has  watched  this  road, 
that  its  extension  to  the  Hudson  River  will  develop  the  business, 
and  increase  the  present  profits,  very  considerably.  Mr.  Bartholo¬ 
mew  told  us  in  Hartford,  when  we  went  there  to  confer  with  the 
trustees,  that  he  had  no  question  about  the  expediency  of  going 
to  the  Hudson  River.  And  so  with  the  other  gentlemen  on  the 
Board  of  Trustees  ;  they  were  both  clearly  of  the  opinion  that  it 
is  desirable  to  go  to  the  river.  But  that  judgment  must  be  taken 
with  this  qualification :  they  are  Hartford  men  ;  and,  of  course, 
anj’  extension  of  that  road  would  undoubtedly  promote  the  pros¬ 
perity  of  that  cit}r ;  so  that  should  be  considered. 

But,  dismissing  these  considerations  altogether,  dealing  with 
the  question  purely  as  a  question  of  business  between  Hartford 
and  Boston,  I  am  clearly  of  opinion  that  this  investment  can  be 
made  without  loss  to  the  State  ;  and  consequent^  I  was  in  favor 
of  a  different  action  from  that  adopted  by  the  majority  of  the 
Committee. 

Then  there  is  another  element  in  the  case. 

Mr.  Chairman.  Would  you  say  further,  that  it  could  not  onl}r 
be  made  without  loss  to  the  State,  but  should  be  made  in  order  to 
save  the  State  from  loss?  Is  that  the  proposition? 

Mr.  Stone.  That  is  just  what  I  mean  to  sa}r.  I  mean  to  say, 
that,  if  four  millions  are  put  in  there,  that  the  terms  of  the  loan 
should  be  such,  that,  if  the  terms  were  carried  out,  then  inciden¬ 
tally  the -State  is  indemnified  fully  for  all  it  has  already  put  in. 
It  is  an  incident  to  the  loan,  that  if  the  loan  is  made,  and  the 
terms  of  the  contract  carried  out,  then  the  State  will  be  indemni¬ 
fied  for  what  it  has  already  put  in. 

The  Chairman.  That  is  a  strong  motive  for  it. 

Mr.  Stone.  That  is  the  only  motive,  Mr.  Chairman.  Of  course 
the  State  would  not  go  into  an  undertaking  of  this  kind,  if  it  had 
no  interest  in  it  already.  But  it  is  a  large  creditor  ;  it  has  a  large 
debt :  and  the  question  is,  How  it  can  protect  itself?  I  think  that 
is  just  the  question  exactl}’.  The  conclusion  which  the  Commit¬ 
tee  oame  to,  and  which  I  dissented  from,  is  this :  that  it  was  de¬ 
sirable,  on  the  whole,  to  allow  this  property  to  be  sold  ;  that  the 
Governor  and  Council  had  better  have  authority  to  sell  this  proper¬ 
ty,  and  get  two  or  three  hundred  thousand  dollars,  and  charge  it 


58 


APPENDIX. 


[Apr 


off  as  a  total  loss.  That  is  the  conclusion  reported,  — that  it 
should  be  sold  out,  and  the  thing  charged  off  the  books,  and  the 
.loss  accepted  as  matter  of  course,  a  thing  that  could  not  be  helped. 

Now,  I  don’t  believe  in  that.  I  cannot  quite  see  how  it  is  wise 
for  the  State  to  do  that,  even  if  we  do  not  propose  to  make  another 
loan.  I  do  not  see  why  it  is  wise  in  the  State  to  sell  its  interest 
in  this  property.  I  don’t  see  any  reason  why  the  State  should  sell 
its  interest. 

Mr.  Dunham.  I  believe  the  Committee  did  not  recommend  the 
sale  of  the  interest :  they  only  recommend  that  the  Governor  and 
Council  be  authorized  in  their  discretion  to  sell. 

Mr.  Stone.  I  say  that  is  substantially  the  same  thing.  I 
understand  precisely  what  the}'  say  ;  and  I  say  it  is  equivalent  to 
the  same  thing.  The  Committee  recommend  that  the  Governor 
and  Council  have  authority  to  do  it,  which  means  that  they  had 
better  do  it.  That  is  what  it  means,  if  it  means  any  thing.  Such 
a  suggestion  as  that  coming  to  the  legislature  is,  in  effect,  a  sug¬ 
gestion,  that,  so  far  as  the}'  are  advised,  it  is  wise  to  do  it.  I  can¬ 
not  quite  see  the  wisdom  of  that. 

But  if  we  don’t  do  it,  then  I  have  a  little  sympathy  with  this 
poor  road.  Because,  if  we  don’t  do  that,  what  is  the  predicament 
of  this  road  ?  Here  is  the  State  that  has  a  very  considerable  amount 
of  money  invested  in  it,  — the  principal  stockholder,  holding  more 
than  a  majority  of  the  stock.  How  can  they  deal  with  other  par¬ 
ties,  if  the  State  will  not  blow  hot  or  blow  cold  ?  That  is  the  ques¬ 
tion.  How  can  they  go  into  any  market,  and  deal  with  any 
brokers,  if  the  State  won’t  do  anything?  Therefore  I  admit,  that, 
if  the  State  won’t  invest -any  money,  they  had  better  sell  their 
property,  if  they  consult  the  interests  of  the  New-York  and  New- 
England  Railroad  Company.  I  have  no  doubt  they  would  very 
much  prefer  we  should  sell  it,  because  then  they  would  be  in  a  con¬ 
dition  to  go  to  other  parties.  They  could  then  say,  “  The  State  has 
made  up  its  mind  to  sell  and  dispose  of  its  property,  and  we  are 
in  a  condition  to  deal  with  you.”  But  so  long  as  the  State  would 
not  do  one  thing  or  another,  and  they  went  to  persons  who  had 
the  means  to  contribute,  they  would  say,  “  The  State  is  the  largest 
creditor,  the  largest  stockholder.  What  will  the  State  do?  We 
don’t  propose  to  lift  the  road  out  of  trouble,  and  give  the  State  of 
Massachusetts  the  benefit  of  it  indirectly.  We  don’t  propose  to 
do  that,  unless  we  receive  a  considerable  bonus  for  doing  it.” 
And  therefore  they  decline  to  touch  it  until  they  know  precisely 
what  action  the  State  will  take. 

Still,  notwithstanding  it  may  be  for  the  interest  of  the  New- 
York  and  New-England  Railroad  Company,  that  this  property 


1878.] 


APPENDIX. 


59 


should  be  sold  by  the  State,  I  think  it  is  not  for  the  interest 
of  Massachusetts  to  do  it,  because  it  seems  to  me  the  time  has 
not  come  for  Massachusetts  to  dismiss  all  this  property  from  con¬ 
sideration  to  deal  with  it  as  a  matter  of  no  value  whatever,  and 
charge  it  off  as  a  total  loss  ;  because  we  can  well  hold  on  to  it  for 
the  present,  and  let  matters  develop.  It  is  possible  that  they  ma3r 
succeed,  notwithstanding  the  embarrassments  which  may  arise  from 
our  relations  to  the  road,  they  may  succeed  in  finding  parties  who 
will  make  a  loan  to  them,  if  they  receive  a  very  considerable  bonus 
for  doing  it,  and  put  the  State  in  a  better  condition  than  it  is  to¬ 
day.  It  is  rather  difficult  to  see  how  the  State  can  be  in  any  worse 
condition.  That  is  the  view  I  wish  to  present  to  the  Committee. 
I  don’t  know  how  the  State  can  be  in  any  worse  condition  ;  and,  if 
the  State  can  be  in  no  worse  condition,  is  it  fair  for  it  to  hold 
still?  I  think  that  is  hardly  a  fair  thing  for  the  State  to  do.  I 
think  the  road  has  the  right,  a  qualified  right,  to  come  here  and  say 
to  the  State,  “  You  have  such  control  of  this  property,  that  we  can¬ 
not  tell  what  we  can  do  until  you  make  up  j'our  mind  what  j'ou 
will  do.  And,  if  3'ou  mean  to  help  us,  sa3r  so ;  and,  if  3Tou  don’t 
mean  to  help  us,  sell  3’our  property  and  get  out  of  the  wa3r,  and  let 
us  find  somebody  else  who  will  help  us.”  That  is  what  operated 
more  or  less  with  the  majority  of  the  Committee.  But  looking 
at  it  as  a  member  of  the  legislature,  as  a  disinterested  party, 
having  no  interest  in  the  property  one  wa3”  or  another,  but  011I3’  as 
a  citizen  of  the  State,  I  don’t  think  it  is  wise  for  the  State  to  sell 
its  property  at  present. 

The  Chairman.  The  Committee  state  their  motive  in  their 
report:  “In  order  that  the  State  may,  as  soon  as  practicable, 
be  withdrawn  from  all  connection  with  work  so  foreign  to  the 
legitimate  purposes  of  government.” 

Mr.  Haynes.  If  Mr.  Stone  will  allow  me,  I  can,  perhaps,  cor¬ 
rect  him  on  that  last  section.  That  section  was  inserted  there 
partl\T  at  the  suggestion  of  Mr.  Hart,  president  of  the  road,  who 
thought,  if  the  State  should  not  consider  it  necessaiy  or  desirable 
to  go  on,  that  other  parties  might  be  found  who  would  take  the 
road. 

Mr.  Stone.  I  so  understand  that.  I  understand  that  the  New- 
York  and  New-England  Railroad  Compaiy  would  like  to  have  us 
do  just  that ;  the3r  would  like  to  have  us  sell  out :  there  is  no  doubt 
of  that  fact.  I  thought  I  had  said  that  to  the  Committee.  But  I 
said  I  did  not  think  it  was  a  wise  thing  for  the  State  to  do.  I 
understand  very  well  what  they  would  like  to  have  us  do  if  we 
are  not  going  to  make  aiy  loan. 


60 


APPENDIX. 


[Apr. 


Mr.  Dunham.  You  mean  to  be  understood  that  your  advice  is, 
that  the  legislature  should  authorize  a  loan  of  $4,000,000  to  the 
New-York  and  New-England  Railroad  Company? 

Mr.  Stone.  Upon  the  strength  of  the  road  as  it  is  now  estab¬ 
lished,  provided  that  they  can  have  a  claim  upon  that  road,  which 
shall  be  a  first  mortgage  for  that  amount ;  that  is,  the  whole  road 
should  be  pledged  for  that  $4,000,000. 

Mr.  Dunham.  That  would  not  change  the  status  of  the  stock 
that  the  State  holds.  The  State  would  still  hold  its  stock? 

Mr.  Stone.  The  State  would  still  hold  its  stock.  The  differ¬ 
ence  between  the  loan  which  we  should  make  (which  would  be 
payable  to  us  from  the  road)  and  the  interest  we  should  have  to 
pa}^  would  indemnify  us  from  what  we  have  alread}7  put  in. 

Mr.  Tucker.  Do  you  propose  to  have  the  State  buy  four  mil¬ 
lions  of  the  ten  millions  of  bottom  bonds,  or  simply  take  them  as 
security?  That  is  to  say,  when  the  loan  was  paid,  when  the 
twenty-five  years  were  up,  would  you  expect  to  receive  from  the 
corporation  $4,000,000  or  $5,000,000,  or  would  you  hold  them  as 
securit}7  ? 

Mr.  Stone.  Hold  them  as  security. 

Mr.  Tucker.  What  right  should  we  have  to  appfy  the  rate  of 
interest  on  those  bonds,  seven  per  cent,  to  our  loan  made  at  five 
per  cent? 

Mr.  Stone.  «  By  virtue  of  the  contract. 

Mr.  Tucker.  In  other  words,  you  would  loan  the  New-York 
and  New-England  Railroad  Company  $4,000,000,  and  receive  back 
$385,000  a  year  in  the  shape  of  interest,  which  would  be  nine  per 
cent  interest? 

Mr.  Stone.  Certainly,  that  is  the  effect  of  it.  We  have  the 
right  to  stipulate  for  any  rate  of  interest  we  please.  The  differ¬ 
ence  between  the  rate  of  interest  paid  and  received  would  indem¬ 
nify  us  for  what  we  have  already  put  in.  That  is  mj*  plan. 

Mr.  Tucker.  You  would  not  expect  an}7  portion  of  the  four 
millions  to  be  paid  until  the  end  of  the  time  for  which  the  bonds 
run,  —  twenty  or  twenfy-five  }’ears? 

Mr.  Stone.  No,  sir. 

Mr.  Dunham.  You  make  no  provision  for  back  interest? 

Mr.  Stone.  We  hold  the  stock:  the  stock  is  not  sold.  If  this 
scheme  works  favorably,  it  gives  value  to  the  stock,  more  or  less  ; 
makes  it  worth  more  than  it  is  worth  now.  If  this  should  work 
favorably,  the  stock  which  is  now  selling  for  ten,  or  thereabouts, 
might  bring  twenty  or  tliirfy,  or  perhaps  forty.  That  would  be  in 
our  control,  and  we  should  have  the  advantage  of  that. 


1878.] 


APPENDIX. 


61 


Mr.  Gilbert.  You  speak  of  making  up  the  back  interest  in 
that  wa3r.  The  interest  on  this  loan  of  $3,600,000  has  been  run¬ 
ning  for  several  years.  We  have  been  paying  $180,000  a  3’ear, 
and  have  got  back  nothing.  You  would  hope  the  increased  value 
of  the  stock  would  enable  3011  to  cover  that. 

Mr.  Stone.  To  cover  that  as  well.  Perhaps  you  have  already 
looked  into  it,  and  understand  generally  what  my  plan  is. 

Mr.  Gilbert.  I  understand  37our  plan,  sir.  It  does  not  differ 
practically  from  the  suggestion  made  by  the  railroad,  except 
their  proposition  is  for  the  State  to  loan  them  six  millions  upon 
the  completed  road  to  the  Hudson  River.  That  takes  two  millions 
more  from  the  State,  and  involves  us  in  the  uncertaint3’  in  regard 
to  that  part  of  the  road,  which  ma3’  cost  four  or  five  hundred  thou¬ 
sand  dollars  more  than  is  estimated,  and  which  ma3T  not  be  so 
productive  as  the3T  estimate.  This  proposition  deals  with  the  road 
as  already  completed,  and  takes  the  actual  receipts  for  the  last 
three  3’ears  as  the  basis  of  valuation. 

Mr.  Stone.  The  scheme  which  I  propose  is  limited  to  the 
propei^  now  established,  and  to  the  value  of  the  road  as  deter¬ 
mined  by  the  past  three  years. 

Mr.  Tucker.  If  we  were  to  receive  no  more  interest  than  we 
pa3%  —  take  your  figures  on  page  10  of  House  Document  No.  2,  — 
you  have  a  total  income  of  $350,000,  as  I  understand  it,  on  the 
present  road,  that  would  pa3T  five  per  cent  on  a  six-million  loan, 
and  leave  a  surplus  of  $50,000,  as  the  road  is  now  run.  That  is 
the  income  as  stated,  —  the  gross  income  of  the  Hartford,  Provi¬ 
dence,  and  Fishkill  Railroad  Compaiw,  and  the  present  New- York 
and  New-England  Railroad.  $350,000  is  the  net  income  of  the 
two  roads;  and,  if  the  State  should  loan  $6,000,000  at  five  per 
cent,  there  would  be  enough  in  the  present  income  to  pa3~  that, 
and  a  surplus  of  $50,000? 

Mr.  Stone.  Yes,  sir :  I  understand  it  so. 

On  page  12  of  the  Report  is  this  paragraph,  which  I  will  call 
attention  to :  — 

“  Wediave  at  every  step  been  more  and  more  impressed  with  the  convic¬ 
tion  that  the  true  interests  of  the  road  lie  in  an  early  separation  from  all 
State  interference  and  management,  and  in  an  abandonment  of  all  hope  of 
aid  from  the  State.  Whenever  the  road  is  managed  solely  by  its  individual 
owners,  by  a  board  of  directors  who  shall  make  it  their  first  duty  to  nurse 
and  develop  its  local  resources  with  an  economy  and  sagacity  which  can 
coine  only  from  constant  and  sharp  supervision  by  private  stockholders,  it 
will  enter  upon  the  path  of  prosperity,  which  State  aid  cannot  give,  and  will 
inevitably  impede.” 

That  is  a  very  good  doctrine  ;  but  I  cannot  quite  see,  and  coul  l 
not  at  the  time,  why  it  should  have  any  bearing  upon  the  question 


62 


APPENDIX. 


[Apr. 


we  are  now  dealing  with.  We  are  not  attempting  to  help  any 
railroad ;  we  are  attempting  to  help  ourselves.  If  we  were 
attempting  to  help  the  New-York  and  New-England  Railroad 
Company,  if  it  was  urged  as  a  matter  of  policy  that  we  should 
help  them,  it  seems  to  me  these  remarks  would  be  verj7  pertinent 
and  proper.  But,  as  I  stated,  I  have  dismissed  all  that  from  my 
consideration.  I  do  not  propose  to  help  this  road.  I  simply  say, 
Can  we  help  ourselves  ?  That  is  the  whole  of  it.  For  the  question 
is,  How  can  we  help  ourselves?  how  can  we  protect  the  State  from 
loss  by  any  arrangement  with  this  property.  It  is  quite  imma¬ 
terial  what  the  policy  of  the  State  should  be  in  regard  to  railroads. 
It  is  only  an  incident  whether  it  happens  to  agree  with  the  wishers 
of  the  railroad  company.  I  don’t  care  any  thing  about  their 
wishes.  The  question  with  me  is  simply,  How  can  the  State  as 
a  creditor  protect  itself  from  loss?  It  seems  to  me  perfectly 
practicable,  owing  to  this  fact,  that  the  State,  by  virtue  of  its 
splendid  credit,  can  obtain  money  on  more  favorable  terms  than 
they  can,  and  will  get  the  benefit  of  the  difference  in  interest. 
We  would  not  go  into  this  business,  if  we  were  not  already  in  to  a 
large  extent ;  but,  in  the  present  posture  of  things,  we  should  avail 
ourselves  of  that  fact,  and  thereby  indemnify  ourselves  from  loss. 
That  is  my  view  of  it. 

Mr.  Gilbert.  The  net  earnings  of  last  year :  I  suppose  j’ou 
•  base  3’our  argument  on  the  present  prosperity  of  the  road.  Last 
year  you  saj7  the  net  earnings  of  the  New-York  and  New-England 
Railroad  for  last  year  were  $184,000.  Now,  if  that  is  actually  so, 
that  is  one  thing :  if  it  is  not  really  and  actually  so,  that  is 
another  thing.  What  I  wish  to  get  at  is  this :  Is  that  $184,000 
the  actual  net  earnings  of  the  road  for  the  last  year,  or  was  a  por¬ 
tion  of  that  used  in  some  way  for  debts  that  were  incurred  last 
year? 

Mr.  Stone.  As  I  understand  it.  I  will  say  that  the  matter 
was  before  our  Committee  two  or  three  times  ;  and  it  is  not  doubted 
that  these  accounts  are  made  up  in  good  faith,  and  represent  fairly 
the  actual  result  of  the  year’s  work.  But  the  money,  the  $184,000, 
was  actually  all  used  up,  entirety  expended,  in  one  way  or  another, 
for  the  benefit  of  the  road.  But  the  legitimate  result,  the  legiti¬ 
mate  cost  of  operating  the  road ;  putting  into  it  every  thing  you 
would  put  in,  not  intending  to  convey  any  false  idea ;  not  putting 
into  property  account  what  should  go  to  expense,  but  putting  into 
expense  every  thing  that  should  property  be  put  there, — rent, 
taxes,  every  thing,  in  that  is  incident  to  the  operation  of  the  road, 
—  and  the  result  was,  the  net  earnings  were  $184,000.  That 
money  was  all  absorbed,  as  I  understand  it,  in  expenditures  that  it 


1878.] 


APPENDIX. 


63 


was  necessary  to  make.  Making  the  distinction  which  all  railroads 
do  make,  as  you  are  aware,  between  what  is  properly  termed  ex¬ 
penses  and  what  may  properly  be  called  property-account,  that 
$184,000  went  into  expenses  relating  to  property  rather  than  the 
actual  expenses  of  operating  the  road. 

Mr.  Gilbert.  Of  course  we  know  that  the  construction-account 
of  a  railroad  can  easily  be  manipulated  by  putting  into  property- 
account  what  should  have  gone  to  expense,  and  make  a  good  show¬ 
ing,  or  vice  versa.  Now  the  point  I  am  getting  at  here  is,  Whethei 
that  $184,000,  which  you  say  has  all  been  used  upon  the  road, — 
whether  that  should  not  have  gone  into  expense-account  rather 
than  to  construction-account? 

Mr.  Stone.  In  regard  to  that,  I  understand  it  was  a  proper 
division.  I  understand  perfectly  well  what  you  refer  to.  Mr. 
Goodspeed,  the  accountant  of  the  Railroad  Commissioners,  and  a 
very  expert  man  in  these  matters,  who,  with  his  experience,  knows 
how  possible  it  is  to  make  a  wrong  showing,  he  sa}'s  he  has  no 
doubt  the  accounts  were  properly  made  up,  and  made  up  in  good 
faith. 

One  thing  I  admit ;  and  that  is,  that  these  receipts,  these  annual 
receipts,  —  the  earnings  of  the  road,  —  are  undoubtedly  needed: 
I  have  no  doubt  they  are  needed  for  these  improvements  from  time 
to  time,  as  expended  last  year  ;  that  is,  in  regard  to  this  division. 
In  regard  to  the  Hartford,  Providence,  and  Fishkill  division :  in 
regard  to  that  portion,  the  testimony  seems  to  me  decisive  on  that 
point,  that  they  have  got  their  road  in  such  first-rate  condition,  that 
they  will  not  hereafter  need  the  money  which  they  have  expended 
heretofore  in  putting  their  road  in  first-rate  order  ;  so  that  the  net 
earnings  of  the  road,  as  stated  by  Mr.  Bartholomew,  the  principal 
trustee,  will  be  available  for  the  payment  of  dividends,  interest, 
or  whatever  other  use  they  may  put  it  to,  beyond  any  doubt. 

The  only  element  in  the  case  (of  course  I  am  arguing  this  mat¬ 
ter  as  a  member  of  the  legislature,  and  as  a  citizen :  I  am  not 
here  as  the  advocate  of  any  man  or  any  scheme), —  the  only  element 
in  the  case  that  creates  any  doubt  in  my  own  mind  is  this :  that 
the  $184,000  was  all  expended  in  improvements.  Now,  although 
the  road  is  placed  in  a  very  much  better  condition  than  it  was  a 
few  years  ago,  }Tet  it  is  by  no  means,  as  yet,  a  first-class  road  ;  so 
that,  although  receiving  year  after  3’ear  more  than  the  expenses  of 
operating  the  road,  they  have  used,  and  probably  for  some  time 
would  have  a  use  for,  all  their  earnings.  The  earnings,  which  ex¬ 
ceed  the  expenditures,  can  very  well  be  applied  by  them  to  im¬ 
proving  the  road  rather  than  to  the  payment  of  interest  upon  bonds, 
3 


APPENDIX. 


64 


[Apr. 


or  any  thing  else.  That  is  a  consideration  which,  of  course,  will 
weigh  with  you  the  same  as  it  did  with  me. 

Mr.  Gilbert.  So  you  must  use  the  net  earnings  of  the  road 
for  some  years  to  come  to  bring  the  road  up  to  a  proper  condi¬ 
tion  ? 

Mr.  Stone.  As  I  understand  it,  the  road  can  be  made  better 
than  it  now  is :  but,  as  against  that,  the  road  is  very  much  im¬ 
proved  from  what  it  was  ;  is  very  much  better  than  it  was.  With 
this  change  in  the  administration,  with  only  one  management,  with 
the  ability  to  organize  the  business,  and  establish  some  uniform 
system,  which  has  not  been  had  heretofore,  I  anticipate  a  consider¬ 
able  increase  in  income  :  it  seems  as  if  there  must  be. 

Mr.  Dunham.  Isn’t  the  term  u  net  earnings”  a  misnomer 
there?  Earnings  which  they  saved  out  of  the  receipts  of  the  road, 
but  which  they  found  it  necessary  to  expend  from  time  to  time, 
every  dollar  of  it,  in  keeping  the  road  in  good  order  —  how  can 
that  be  called  net  earnings? 

Mr.  Stone.  I  don’t  think  that  is  so.  I  don’t  understand  in 
any  instance  that  they  have  put  into  some  other  place  in  the 
accounts  what  should  have  gone  into  expense  ;  for  instance,  take 
a  common  case,  supposing  you  were  running  a  factory,  and  in  any 
given  year  you  had  incurred  an  extraordinary  expense,  which  does 
not  go  into  the  ordinary  or  current  expenses  of  the  year,  which 
is  not  in  any  proper  sense  wear  and  tear,  or  repairs  which  should 
properly’  have  gone  into  ordinary’  expenses,  you  would  place  that 
extraordinary7  expense  in  a  separate  account  to  convey  a  correct 
understanding  of  the  result  of  the  y’ear’s  work.  I  admit  that  this 
money’  was  properly  expended,  was  wisely  expended. 

Mr.  Gilbert.  Supposing  the  state  should  loan  them  $5,000,- 
000  ;  according  to  your  scheme,  how  is  the  road  going  to  get  the 
money7  to  pay  the  interest,  if  the  net  earnings  are  to  be  used  to 
keep  the  road  in  good  order,  as  they  have  been  the  past  y’ear? 

Mr.  Stone.  My  answer  to  that  is,  They  have  been  improving 
the  road  all  the  time,  and  could  so  apply  their  earnings  for  some 
time  to  come,  if  they  did  not  pay  interest  on  their  bonds.  But, 
this  mortgage  being  a  first  claim  on  the  property’,  if  the  interest  is 
not  paid,  y  ou  will  have  the  right  to  take  possession  immediately ; 
and  the  road  as  it  has  been  run  for  the  last  three  y’ears,  not  im 
proving  it,  keeping  it  where  it  now  is,  and  not  undertaking  to 
make  it  any  better,  has  fully  paid  the  interest  on  $5,000,000. 

Mr.  Dunham.  If  the  managers  of  the  New-England  Road  are 
unable  to  run  the  road,  or  run  it  in  such  a  way7  that  they7  are 
are  obliged  to  expend  all  the  net  earnings  in  keeping  the  road  in 
repair,  how  much  better  could  the  State  run  the  road  if  they7  took 


1878.] 


APPENDIX. 


65 


possession  of  it?  You  were  saying,  that,  in  case  they  did  not  pay 
the  interest,  the  State  could  take  possession  of  the  road.  If  the 
road  is  not  able  to  earn  any  thing  now,  under  the  good  manage¬ 
ment  of  the  New-York  and  New-England  Railroad  Company,  how 
much  better  could  the  State  do  ? 

Mr.  Stone.  I  say  the  State  could  do  it :  the  State  does  it  now. 
My  proposition  is  based  upon  the  actual  result  for  the  last  three 
years.  I  say  they  are  doing  it  now. 

Mr.  Dunham.  You  were  saying,  that  in  the  event  of  a  new  loan 
being  made,  and  they  did  not  pa}T  the  interest,  the  State  could 
take  possession. 

Mr.  Stone.  I  was  saying  the  State  could  take  possession. 
The  State  could  then  sell  out  for  five  millions  ;  but  they  would  not 
sell  for  five  millions.  You  could  not  find  a  man  who  would  sell 
out  for  five  millions.  I  don’t  consider  five  millions  any  sort  of  a 
price  for  that  property. 

Mr.  Dunham.  I  am  glad  that  you  view  our  stock  as  worth 
something.  I  should  like  to  believe  that  is  all  true. 

Mr.  Stone.  I  have  no  doubt  it* is  worth  five  millions.  You 
will  observe  that  this  assumes  that  we  own  another  road  :  we  have 
now  got  only  half  of  it.  The  Hartford,  Providence,  and  Fishkill 
bonds  are  selling  at  seven  or  eight  per  cent  preminm  ;  and  they 
are  a  lien  on  the  road  to  the  extent  of  82,000,000.  Less  than 
half  of  your  road  would  sell  for  more  than  $2,000,000. 

Mr.  Dunham.  Do  }tou  really  consider  the  stock  valuable  in  its 
present  condition  ? 

Mr.  Stone.  It  is  worth  something.  But  we  now  only  own 
this  part  of  the  road,  and  have  the  right  of  redemption  of  the 
Hartford,  Providence,  and  Fishkill.  We  all  agree  that  that  divi¬ 
sion  of  the  road  has  considerable  value  in  it  to-da}T.  I  think  you 
will  be  satisfied,  when  you  come  to  inquire  into  it,  that  the  Hart¬ 
ford,  Providence,  and  Fishkill  division  would  be  a  very  desirable 
purchase  at  three  millions  of  money,  — ■  a  ver}’  desirable  purchase. 

Mr.  Dunham.  It  is  owned  by  the  New-York  and  New-England 
Road,  subject  to  a  mortgage  ? 

Mr.  Stone.  They  have  the  right  of  redemption.  This  scheme 
supposes  it  is  redeemed,  and  that  the  New-York  and  New-Eng¬ 
land  Railroad  Company  has  possession  of  that  piece  of  property. 

This  part  of  the  property  is  in  a  different  predicament.  It  was 
urged  that  the  earnings  of  this  property  were  veiw  much  less  than 
those  of  other  roads  similarly  situated  ;  and  I  can  see  no  reason 
why  the  income  of  this  property,  if  put  upon  a  good  footing, 
should  not  be  considerabl}'  increased,  and  the  business  consider  . 
abty  increased.  Although  the  road  runs  across  the  country v  and 


66 


APPENDIX. 


[Apr. 


the  tendency  of  trade,  of  course,  is  down  the  valley’s  and  the 
rivers  of  Connecticut,  towards  the  Sound,  yet  as  a  set-off  to  that 
is  the  fact  that  this  road  runs  through  a  portion  of  the  country 
where  there  is  no  probability  of  competition,  where  there  will  be 
a  steady  increase  of  business,  where  the  business  of  the  road  is 
exclusively  the  property  of  the  road,  and  probably  al  way’s  will  be. 
If  y*ou  will  look  at  the  map  of  Connecticut,  y'ou  will  see  that  the 
business  of  a  section  of  the  country  is  the  entire  property7  of  this 
road  practically,  although  not  large  compared  with  the  roads  run¬ 
ning  in  the  other  direction  ;  but,  in  doing  that  business,'  it  is  free 
from  competition. 

Mr.  Dunham.  Are  there,  to  your  knowledge,  any  complications 
in  the  way,  and  dispute  in  regard  to  the  right,  of  the  New-York 
and  New-England  Railroad  Company  to  redeem  that  mortgage  on 
the  Hartford,  Providence,  and  Fishkill  Road? 

Mr.  Stone.  That  is  a  matter  which  I  have  not  studied  ;  but 
Mr.  Baldwin,  who  is  the  counsel  for  that  road,  and  who,  of  course, 
is  familiar  with  all  those  questions,  stated  that  that  was  a  matter 
about  which  there  was  no  doubt  at  all,  no  question  about  the 
right  to  redeem  that  road.  That  is  your  question  as  I  understand 
it.  There  is  no  question  about  that.  I  asked  Mr.  Bartholomew, 
who  is  one  of  the  trustees  under  that  mortgage,- about  that;  and 
he  also  said  he  did  not  suppose  there  was  any  question  about  the 
right  of  this  road  to  redeem. 

Mr.  Gilbert.  You  propose  to  loan  the  road  $5,000,000? 

Mr.  Stone.  $4,000,000.  I  said  I  thought  the  property  was 
good  security  for  $5,000,000. 

Mr.  Osgood.  If  I  understand  your  suggestion,  it  is  this :  You 
would  recommend  that  the  State  make  a  loan  of  $4,000,000  to  this 
road,  provided  they’  can  give  a  first  mortgage  on  the  line  between 
Boston  and  Waterbury? 

Mr.  Stone.  Upon  what  is  now  finished.  I  may  have  said 
Hartford  ;  but  I  meant  as  far  as  the  road  is  finished. 

Mr.  Osgood.  The  New-York  and  New-England,  and  the  Hart¬ 
ford,  Providence,  and  Fishkill,  which  is  finished  to  Waterbury. 
That  is  the  simple  proposition  ? 

Mr.  Stone.  If  they  can  give  a  first-class  mortgage.  They 
have  authority  to  issue  a  mortgage  for  $10,000,000 ;  and  I  sup¬ 
pose  it  is  practicable,  if  they  consent,  that  we  should  have  a  first 
lien  on  the  road  for  $4,000,000. 

There  is  another  thing,  gentlemen.  I  rather  inferred,  although 
I  don’t  know,  —  I  rather  inferred,  from  some  remarks  reported  in 
the  paper  the  other  day’,  that  this  proposition  of  mine  is  not  satis¬ 
factory  to  the  parties  interested  in  the  road.  Of  course,  if  they 


1878.] 


APPENDIX. 


67 


don’t  want  it,  that  is  the  end  of  it.  If  they  will  only  be  content 
with  a  loan  of  $6,000,000,  of  course  it  is  idle  to  talk  about  $4,000- 
000.  I  am  not  willing  to  give  them  $6,000,000,  because  I  think 
$6,000,000  involves  an  element  of  uncertainty  which  it  is  not 
wise  to  consider. 

Mr.  Osgood.  But  if  the  State  can  get  a  first  mortgage  upon 
that  line  from  Boston  to  Waterbury,  as  it  is  now  built,  you  advise 
the  loaning  of  $4,000,000,  provided  the  $10,000,000  can  be  got  rid 
of.  $376,000  of  the  $10,000,000  are  now  out  I  believe? 

Mr.  Stone.  That  they  say  the}"  can  control. 

Mr.  Osgood.  The  $10,000,000  you  would  turn  into  $4,000,000? 

Mr.  Stone.  Not  exactly.  I  suppose,  to  the  extent  of  our  loan, 
the  bonds  could  be  stamped,  or  the  remainder  of  the  issue  could 
be  stamped,  so  that  every  holder  of  them  would  know  that  they 
held  them  subject  to  the  first  mortgage  to  the  State,  subject  to  our 
claim.  Although  the  mortgage  is  in  effect  a  mortgage  for  $10,- 
000,000,  I  don’t  think  there  would  be  any  legal  difficulty  in  so 
negotiating  the  loan  that  the  parties  taking  the  remainder  of  that 
issue  of  $10,000,000  would  take  it  subject  to  our  claim.  That  is 
a  consideration  that  may  weigh  with  the  parties  interested  in  the 
road.  If  our  loan  is  to  be  preferred,  the  rest  of  the  issue  of  $10,- 
000,000  will  not  sell  so  favorably  as  they  desire. 

Mr.  Osgood.  The  rest  of  the  issue  would  be,  in  effect,  a  second 
mortgage. 

Mr.  Stone.  On  that  portion  of  the  road.  I  want  to  call 
attention  to  another  matter  in  this  proposition,  which  may  escape 
your  notice.  My  suggestion  is,  that  our  mortgage  should  be  a 
first  mortgage  upon  the  road  now  finished  to  Waterbury.  If  they 
extend  their  road  to  the  Hudson  River,  then,  on  that  part  of  the 
road,’  the  remainder  of  the  issue  of  the  $10,000,000  would  be  a 
first  lien. 

Mr.  Gilbert.  Will  it  not  also  cover  the  road  between  Boston 
and  Waterbury? 

Mr.  Stone.  The  State’s  mortgage  will  be  upon  both  divisions, 
but  will  not  extend  to  Fishkill. 

Mr.  Dunham.  It  will  include  the  Hartford,  .Providence,  and 
Fishkill? 

Mr.  Stone.  As  far  as  Waterbury.  If  they  conclude  to  build 
from  Waterbury  to  the  Hudson,  then  the  mortgage  on  that  exten¬ 
sion  "would  be  a  first  mortgage  ;  and  the  road  would  have  the  ben- 
efit  of  that  to  make  the  extension. 

Mr.  Chapin.  Would  you  prefer  to  have  a  second  mortgage 
upon  the  new  portion  now  unfinished  rather  than  have  one  mort¬ 
gage  extend  to  the  Hudson  River  from  Boston?  If  the  State 


68 


APPENDIX. 


[Apr. 


should  loan  the  road  six  millions,  wouldn’t  you  rather  have  a  first 
mortgage  on  the  whole  road  than  loan  four  millions,  and  have  a 
first  mortgage  only  to  W aterbury  ? 

Mr.  Stone.  My  suggestion  is  to  loan  four  millions,  and  to  loan 
only  four  millions. 

Mr.  Chapin.  You  are  not  in  favor  of  completion? 

Mr.  Stone.  I  am  not  in  favor  of  the  State  engaging  in  the 
completion. 

Mr.  Chapin.  You  are  not  in  favor  of  the  completion  of  the 
New-York  and  New-England  Railroad,  and  loaning  them  six  mil¬ 
lions?  As  the  result  of  }’Our  investigation,  3’ou  do  not  favor 
that  proposition? 

Mr.  Stone.  You  will  find  that  so  appears  in  our  Report. 

Mr.  Baldwin.  Will  the  Committee  permit  us  to  set  ourselves 
right  in  respect  to  Mr.  Stone’s  suggestion  about  the  four-million 
loan?  It  is  true,  that,  as  that  was  discussed  by  the  Committee,  it 
would  probably  not  be  satisfactory  to  the  railroad  company.  Jt  is 
simply  the  question  of  the  interest  they  should  pay  for  $4,000,000. 
The  suggestion  was,  that,  for  the  $4,000,000,  we  should  pay  the 
interest  on  $5,500,000  :  that  would  be  pretty  nearly  ten  per  cent 
interest.  We  should  be  very  glad  to  borrow  four  millions  of  the 
Commonwealth,  and  pay  them  the  same  rate  of  bonus  as  if  we 
borrowed  six  millions  ;  that  is,  pay  one  hundred  and  twenty  thou¬ 
sand  instead  of  one  hundred  and  eighty  thousand. 

With  respect  to  making  it  a  first  lien  upon  the  property,  prob¬ 
ably  the  simplest  way,  if  satisfactory  to  the  directors,  and  satisfac¬ 
tory  to  the  legislature,  would  be  to  deposit  all  the  rest  of  the  six 
million  of  bonds  with  the  trustee,  not  to  be  issued.  Then  3’ou 
would  have  a  first  mortgage  ;  and,  if  the  company  want  to  build 
the  road  to  the  Hudson  River,  then  we  must  make  a  second  mort¬ 
gage.  But  that  is  a  mere  suggestion  that  has  occurred  to  me  as 
Mr.  Stone  has  been  talking. 

Mr.  Chapin.  Mr.  Stone,  are  you  under  the  impression  that  it 
would  not  be  better  to  put  in  two  millions  more,  and  make  that 
road  a  first-class  road  to  the  Hudson  River?  Do  you  think  it  im¬ 
practicable  for  the  State  to  engage  in  that  in  order  to  improve 
the  balance  of  that  property,  and  make  the  whole  line  a  first-class 
line,  instead  of  making  it  a  line  which  is  unable  to  do  the  business 
which  should  come  over  the  road  ? 

Mr.  Stone.  I  am  not  prepared  to  say  that  I  should  not  favor 
that  rather  than  do  nothing.  But  I  am  opposed  to  that  scheme, 
because  I  think  this  is  a  better  scheme.  I  should  much  prefer  to 
put  in  four  millions  than  to  put  in  six.  My  idea  is,  that,  if  we 
put  in  four  millions,  somebody  else  would  finish  the  road  to  the 


1878.] 


APPENDIX. 


69 


Hudson  River.  That  is  ray  expectation,  that,  if  the  State  puts 
in  four  millions,  they  will  go  to  -  the  Hudson  River  without  our 
help.  I  much  prefer  they  should  go  there  without  our  help  than  to 
put  any  further  money  in. 

Remarks  of  F.  M.  Stone  of  Waltham. 

The  Chairman.  The  Committee  would  be  pleased  to  hear  from 
some  one  of  the  majority  of  the  Committee. 

Mr.  F.  M.  Stone,  Chairman  of  the  Committee  of  1877.  Mr. 
Chairman,  I  don’t  know  that  I  have  any  thing  to  say  about  this 
matter.  I  am  perfectly  willing  to  answer  any  questions  that  the 
members  of  the  Committee  may  desire  to  put  to  me.  It  is  a  sub¬ 
ject  that  has  not  engaged  my  attention  since  the  Committee  closed 
its  hearings,  and  I  shall  not  be  so  fresh  in  my  recollection  in  many 
things  as  my  friend  Col.  Stone  is. 

I  have  no  desire  to  volunteer  any  thing. 

The  Chairman.  What  do  you  think  of  the  proposition  sub¬ 
mitted  by  Mr.  Stone,  of  the  loaning  of  four  millions,  secured  by  a 
first  mortgage  on  all  the  road  terminating  at  Waterbury?  I  mean 
■what  do  you  think  of  it  as  safe  for  the  State  to  do,  and  also  as 
affording  an  opportunity  for  the  State  to  secure  itself  from  any 
loss  on  its  present  investment  as  it  now  stands? 

Mr.  Stone  of  Waltham.  I  never  understood,  Mr.  Chairman, 
and  did  not  understand  while  the  Committee  were  discussing  that 
question,  that  that  -was  acceptable  to  the  corporation.  It  was  a 
proposition  we  discussed,  being  suggested  by  one  of  our  members, 
a  member  of  our  Committee.  And  it  seems  to  me  that  the  first 
question  for  your  Committee  to  pass  upon  is,  whether  or  not  the 
corporation  wants  any  loan  from  the  State  of  $4,000,000,  and,  if 
so,  upon  what  terms.  If  I  knew  that,  then  I  should  have  an  opin¬ 
ion  upon  it. 

The  Chairman.  Isn’t  it  proper  for  the  Committee  to  consider 
it,  because  we  are  considering  the  interests  of  the  State,  and  not 
the  interests  of  the  road  ? 

Mr.  Stone.  I  should  think  not,  because  this  requires  the  agree¬ 
ment  of  two  parties,  —  the  corporation  and  the  State.  If  you  know 
in  advance  that  the  corporation  would  not  accept  it,  what  is  the 
use  of  considering  it? 

The  Chairman.  Your  understanding  wras,  that  the}’  refused  it? 

Mr.  Stone.  I  don’t  understand  the}-  propose  it,  or  say  it  would 
be  acceptable. 

Mr.  Osgood.  The  question  is  this  :  What  proposition  shall  the 
State  make,  if  any,  in  regard  to  their  investment  in  the  securities 
of  this  road? 


TO  APPENDIX.  [Apr. 

Mr.  Stone  of  Newburyport.  Not  what  the  corporation  will 
accept. 

Mr.  Stone  of  Waltham.  I  don’t  understand  it  is  the  part  of 
the  State,  in  the  present  condition  of  affairs,  to  volunteer  a  loan  to 
this  railroad  compan}7,  or  to  any  other  railroad  company. 

The  Chairman.  If  the  State  is  considering  how  it  may  save 
itself  from  loss,  isn’t  it  proper  to  consider  any  means  by  which  it 
may  secure  that  result  ? 

Mr.  Stone.  I  understand  this.  The  question  put  to  me  is  as 
to  the  expediency  of  making  a  loan  of  four  millions  to  this  corpo¬ 
ration. 

The  Chairman.  The  expediency  with  reference  to  securing  the 
State  from  loss  upon  its  present  investment  in  the  road. 

Mr.  Stone.  I  understand  all  that.  But  do  you  know  whether 
or  not  the  corporation  will  accept  the  loan  ? 

The  Chairman.  In  regard  to  that,  if  we  are  looking  about  to 
save  the  State  from  loss,  isn’t  it  proper  for  the  State  to  propose 
that  to  the  road,  and  see  if  the}"  will  accept  it? 

Mr.  Baldwin.  To  save  embarrassment,  I  will  say  that  the  road 
will  be  very  glad  to  borrow  $4,000,000  upon  such  terms  as  may 
be  agreed  upon. 

Mr.  Stone.  But  not  upon  the  terms  proposed  by  Col.  Stone? 

Mr.  Baldwin.  The  question  was,  whether  it  would  be  safe  for 
the  State  to  loan  the  Corporation  $4,000,000  upon  such  terms  as 
may  be  agreed  upon ;  whether  the  security  is  good  for  $4,000,000. 

The  Chairman.  Mr.  Stone,  I  will  call  your  attention  to  the 
question  of  the  Committee.  If  it  could  be  made  apparent  that 
the  State  could  secure  itself  by  the  acceptance  of  such  a  proposi¬ 
tion,  wouldn’t  it  then  be  a  proper  thing  for  the  Committee  to  con¬ 
sider  whether  they  would  make  such  a  proposition,  and  see  if  the 
road  will  accept  it? 

Mr.  Stone.  I  have  an  impression,  Mr.  Chairman.  Of  course 
the  Committee  understand  that  I  am  not  a  railroad  expert,  nor 
professing  to  be  intimately  acquainted  with  railroad  affairs ;  but, 
from  the  examination  we  had  last  summer  and  last  fall,  I  have  an 
impression  that  the  road  would  be  security  for  $4,000,000. 

The  Chairman.  And  also  that  it  would  secure  that  result, 
that  it  would  stop  the  State’s  loss  on  its  present  investment? 

Mr.  Stone.  That  I  have  my  doubts  about.  I  had  supposed 
that  $4,000,000  would  not  be  adequate  to  accomplish  wfhat  my 
friend  the  colonel  proposes  here.  It  will  take  about  that  sum  to 
wipe  out  the  existing  indebtedness. 

Mr.  Baldwin.  That  is  all  that  is  wanted.  Six  millions  con¬ 
templates  the  completion  of  the  road  ;  four  millions,  the  redeem¬ 
ing  it  from  its  present  debt. 


1878.] 


APPENDIX. 


71 


Mr.  Stone.  They  would  then  be  without  terminal  facilities  in 
Boston,  and  there  must  be  large  expenditures  to  procure  those, 
which  would  not  be  met  by  any  loan  of  $4,000,000. 

Mr.  Baldwin.  We  are  paying  rent  for  that  now. 

Mr.  Stone.  I  understand  that.  I  understand  the  proposition 
to  be  a  loan  of  $4,000,000,  which  would  only  relieve  the  road 
from  existing  embarrassments,  and  they  would  then  have  no  ter¬ 
minal  facilities  in  Boston,  which  they  need  as  much  as  they  need 
any  thing  on  the  road.  This  $4,000,000  would  not  procure  those. 

Then  I  suppose  the  State  would  not  loan  $4,000,000  to  this 
corporation,  or  any  other  corporation,  without  doing  what  it 
always  has  done, — require  the  party  to  establish  a  sinking-fund, 
would  they?  It  would  take  quite  a  considerable  amount  to  estab¬ 
lish  a  sinking-fund  that  would  redeem  the  sum  that  would  be 
due  in  1900.  When  j-ou  have  taken  that  out,  I  venture  to  say 
that  the  corporation  would  not  have  enough  left  out  of  four  mil¬ 
lions  to  place  them  in  the  condition  they  ought  to  be  in ;  and . 
then  they  would  be  without  terminal  facilities.  Four  millions  is 
going  too  far,  or  it  is  not  going  far  enough.  Do  one  of  two 
things,  — loan  them  enough  to  wipe  out  the  existing  indebtedness  on 
the  Hartford,  Providence,  and  Fishkill  Road,  which  they  claim  is 
the  thing  which  is  the  greatest  thorn  in  their  sides,  or  else  loan 
them  $6,000,000,  and  complete  the  whole  thing  through  to  the 
Hudson  River. 

I  think  the  Committee  were  unanimous  on  the  proposition  we 
received  from  the  railroad  company,  which  was  really  the  only 
proposition  there  was  before  us  ;  that  is,  the  loan  of  the  $6,000,- 
000,  to  go  through  to  the  Hudson  River.  I  think  we  were  unani¬ 
mous  upon  that. 

Doesn’t  that  dispose  of  this  question?  It  seems  to  me  so. 

Mr.  Osgood.  What  is  your  judgment  as  to  whether  this  road, 
in  its  present  condition,  without  being  completed,  can  earn  enough 
to  pay  the  interest  upon  a  loan  of  $4,000,000,  without  terminal 
facilities,  and  without  through  connections  by  way  of  Fishkill? 

Mr.  Stone.  I  think  we  have  stated  that  in  the  Report.  I  think 
it  is  fair  to  assume  that  the  Committee  found  unanimously  that  the 
earnings  of  this  road  would  substantially  cover  that  sum,  probably. 

Mr.  Osgood.  So  that  a  four-million  loan,  in  your  judgment, 
would  be  secure? 

Mr.  Stone.  If  the  correction  is  to  be  made  as  suggested  here, 
as  to  the  item  of  rent.  This  figures  up  a  deficienc}’ of  $89,000. 
Making  the  correction,  and  taking  the  operation  of  last  year,  it 
would  leave  a  deficiency  of  thirty  or  forty  thousand. 


72 


APPENDIX. 


[Apr. 


Mr.  Osgood.  If  you  think  the  road  will  earn  enough  to  pay 
the  interest  on  $4,000,000,  the  State,  according  to  Mr.  Stone’s 
idea,  would  gain  the  difference  in  interest  between  what  the  State 
would  have  to  pay  on  the  four  millions  of  scrip  and  what  the  road 
would  pay  as  interest  on  four  millions  of  bonds.  That  would  be 
an  advantage  to  the  State  under  Mr.  Stone’s  scheme. 

Mr.  Stone.  I  don’t  think  I  quite  fully  get  your  question.  But, 
to  answer  your  question  as  I  understand  it,  if  you  will  take  page 
10  of  the  Report  }*ou  will  find  the  opinion  of  the  majority  of  the 
Committee  :  — 

“  While,  therefore,  it  would  seem  that  the  interest  on  the  $4,000,000 
would  be  reasonably  secure,  we  find  no  grounds  for  confidence  that  the  inter¬ 
est  on  the  old  debt  could  be  paid  out  of  earnings  for  many  years  to  come.” 

No  ground  for  confidence. 

Mr.  Osgood.  But  if  the  interest  could  be  paid  upon  $4,000,- 
000,  then  the  State  would  gain  the  difference  between  the  interest 
it  would  pa}r  on  the  $4,000,000  and  what  the  road  paid  it. 

Mr.  Stone.  Not  if  all  they  pay  is  what  the  State  pays  simply. 
We  have  not  gained  any  thing  by  that  operation. 

Mr.  Osgood.  Suppose  the  State  should  get  its  loan  at  four  per 
cent,  and  the  railroad  should  pay  the  State  seven  per  cent  on 
$4,000,000.  Suppose  the  State  should  get  their  $4,000,000  at 
four  per  cent  by  issuing  their  scrip,  and  the  railroad  pay  the  State 
seven  per  cent,  the  State  gains  the  difference  between  four  per 
cent  and  seven  per  cent. 

Mr.  Stone.  Of  course  they  would.  The  proposition  was,  that 
they  should  pledge  5,500,000  bonds,  on  which  the}"  should  pay 
seven  per  cent.  Mr.  Osgood  proposes  that  the  State  should  loan 
them  four  millions  which  the  state  could  borrow  at  four  per  cent, 
and  lend  to  them  at  seven  per  cent. 

Mr.  Osgood.  They  pay  seven  per  cent  on  four  millions,  and 
we  pay  but  four  per  cent. 

Mr.  Stone.  This  is  precisely  the  colonel’s  proposition.  You 
loan  them  four  millions, and  they  pledge  with  the  State  5,500,000 
of  seven-per-cent  bonds.  They  pay  the  difference  between  seven 
per  cent  and  whatever  the  State  has  to  pay  for  its  money. 

Mr.  Osgood.  The  State  would  certainly  gain  the  difference  in 
interest. 

Mr.  Stone.  The  difference  between  whatever  they  paid  us, 
and  whatever  we  paid. 

Col.  Stotne  of  Newburyport.  My  suggestion  w-as,  that  the 
collateral  should  be  large  enough  to  make  the  difference  between 
the  two  cover  the  entire  loss  to  the  State  from  its  old  investment. 


1878.] 


APPENDIX. 


73 


Your  suggestion  is  to  pay  four  millions,  or  loan  four  millions  pro 
tanto. 

Mr.  Osgood.  Yours  makes  the  rate  of  interest  larger,  because 
the  collateral  is  larger. 

Col.  Stone.  In  effect  it  makes  it  larger  than  as  you  suggest  it 
would  be^ro  tanto. 

Mr.  Osgood.  The  State  would  gain  as  much  as  that.  If  the 
road  is  perfectly  able  to  pay  the  interest  on  $4,000,000,  the  State 
would  certainly  gain,  if  it  made  the  loan,  the  difference  in  interest. 

Mr.  Stone.  Certainly  we  should. 

Mr.  Dunham.  That  is  all  assuming  that  this  road  would  pay 
the  interest. 

Mr.  Osgood.  They  all  agree  they  could  do  that. 

Mr.  Stone.  We  all  agree  about  that. 

Mr.  Osgood.  That  four  millions  would  be  a  reasonably  safe 
loan? 

Mr.  Stone.  Yes,  sir,  we  say  so  —  all  of  us.  There  is  no  ques¬ 
tion  about  that  in  my  mind. 

Mr.  Osgood.  At  seven  per  cent? 

Mr.  Stone.  Do  I  understand  your  question,  Whether  it  would 
be  safe  to  loan  at  seven  per  cent? 

Mr. - .  As  safe  at  one  price  as  at  another,  isn’t  it? 

Mr.  Stone.  Yes,  sir,  probably.  I  think  there  is  value  in  the 
property  there  of  more  than  $4,000,000.  My  point,  Mr.  Chair¬ 
man,  as  you  will  see,  is,  I  dismissed  —  I  don’t  know  as  I  am 
here  as  advocating.  I  don’t  understand  exactly  how  this  matter 
is  before  your  Committee,  —  whether  this  Committee  is  on  trial, 
whether  the  road  is  trial,  or  whether  it  is  a  trial  all  around.  It 
seems  to  be  a  queer  position  for  us  as  members  of  the  Committee 
to  be  in  ;  but  I  desire  to  give  all  the  information  I  can. 

My  own  view  is  this  :  We  dismissed  from  our  mind  the  proposi¬ 
tion  to  make  a  loan  of  $6,000,000,  no  one  of  our  Committee  being 
in  favor  of  it.  Then  upon  a  suggestion  being  made  by  a  member 
of  our  Committee,  that  a  loan  of  $4,000,000  might  result  in  an 
advantage  to  the  State  and  the  road,  that  we  considered  ;  and 
upon  that,  as  I  said  before,  m3’  idea  is,  that  $4,000,000  would  not 
place  the  road,  in  the  condition  which  it  ought  to  be  placed  in,  if 
any  thing  is  to  be  done.  It  don’t  provide  terminal  facilities. 
The}"  must  have  the  loan,  less  the  amount  required  to  establish 
a  sinking-fund,  and,  after  that  is  taken  out,  the}’  have  not  got 
enough  to  wipe  out  all  the  underlying  indebtedness.  Therefore 
there  is  no  use  in  making  such  a  loan  as  that.  They  must  have 
enough  to  do  that,  if  the  road  is  going  forward. 

Mr.  Tucker!  Do  you  think,  taking  page  18,  that  the  road 


APPENDIX. 


74 


[Apr. 


will  be  able  to  pay  the  amount  of  interest  specified,  —  $385,000  a 
year  ? 

Mr.  Stone.  Judging  from  what  they  have  done,  I  don’t  see 
why  they  might  not. 

Mr.  Tucker.  You  think  they  would  be  able  to  pay  in  interest 
$385,000  a  year? 

Mr.  Stone.  Judging  from  what  they  have  done. 

Mr.  Tucker.  That  would  be  the  interest  at  seven  per  cent  on 
$5,500,000  in  bonds.  And  if  the  State  loaned  them  $4,00,000, 
which  it  raised  at  five  per  cent,  it  would  make  just  that  difference 
of  $180,000  a  year,  —  what  the  State  is  paying  for  interest  now. 

Mr.  Stone.  $350,000  is  put  down  there  as  the  income. 

Mr.  Tucker.  The  question  with  you,  is,  whether  the  road 
would  make  up  that  difference. 

Mr.  Stone.  I  can’t  say  about  that :  it  is  problematical.  As 
the  colonel  said,  we  were  left  somewhat  in  the  dark  as  to 
what  expenditures  would  be  required  upon  this  road  in  years  to 
come.  The  testimony  was  various,  not  to  say  conflicting.  A 
good  many  things  were  pointed  out  to  us  that  good  policy  and  good 
management  required  to  be  done,  and  which  required  a  large  ex¬ 
penditure  of  money  to  be  made,  year  after  year,  for  a  considerable 
ength  of  time,  —  a  good  length  of  time.  A  large  amount  of  work 
required  to  be  done  at  South  Boston,  and  over  the  road,  in  chan¬ 
ging  the  condition  of  things,  — their  road-bed,  extending  double¬ 
track,  and  adding  a  variety  of  other  things  at  almost  every  point 
on  the  line  of  the  road.  At  the  same,  time  we  were  fully  assured, 
I  think,  that  the  condition  of  the  road  had  been  most  decidedly 
improved  since  the  present  managers  had  been  in  the  management 
of  the  road  :  it  had  been  brought  up  very  much.  But  how  great 
an  expenditure  will  have  to  be  made  in  the  future  to  bring  that 
road  up  is  entirely  problamatical. 

Mr.  Tucker.  You  understand,  Mr.  Stone,  that,  if  these  $4,000- 
000  were  to  be  issued,  they  would  pa}’  up  the  present  indebtedness 
of  that  road,  floating  debt  and  all? 

Mr.  Stone.  That  is  a  matter  susceptible  of  proof :  I  believe  it 
to  be  so.  You  will  find  on  page  9  a  statement  of  the  indebted¬ 
ness,  —  $4,016,690  :  that  is  the  indebtedness  of  both  roads.  The 
colonel  suggests  that  there  are  some  small  items  to  come  out  of 
that,  which  are  included  in  the  floating  debt ;  but,  after  all,  it  does 
not  materially  change  the  condition  :  it  is  about  $4,000,000.  That 
is  what  the  managers  of  the  road  have  always  stated :  we  don’t 
find  it  to  vary. 

I  want  to  say,  on  the  other  hand,  that  we  have  received  from 
the  managers  of  the  road  every  assistance  in  their  power ;  and, 


1878.1 


APPENDIX. 


75 


giving  a  personal  expression  of  my  feelings  about  the  matter,  I 
think  they  certainly  show  a  disposition  to  aid  us  in  every  respect 
within  their  power,  without  manifesting  the  slightest  inclination  to 
keep  back  any  thing  on  the  subjects  of  which  we  inquired. 

Mr.  Osgood.  I  understand  you  were  saying  you  did  not  know 
what  was  before  the  Committee.  I  understand  the  question  before 
this  Committee  is  the  same  question  that  was  before  your  Com¬ 
mittee  :  u  What  action  it  may  be  expedient  for  the  State  to  take  in 
relation  to  its  investment  in  the  stock  and  securities  of  the  New- 
York  and  New-England  Railroad.” 

This  Committee  called  upon  the  members  of  your  Committee  to 
come  in  as  gentlemen  that  had  made  a  thorough  examination  into 
the  subject,  and  were  competent  and  able  to  advise  this  Committee 
in  regard  to  exactly  that  point,  —  what  the  State  ought  to  do. 
Now,  as  I  understand,  your  conclusion  is,  the  State  had  better  sell 
its  stock,  or  at  least  authorize  the  Governor  and  Council  to  sell  it, 
and  collect  the  note  of  $250,000  held  by  the  State,  in  order  that 
the  State  may,  as  soon  as  practicable,  withdraw  from  the  manage¬ 
ment  of  railroads. 

Mr.  Stone.  I  see  no  substantial  —  I  am  stating  my  ideas 
about  it;  I  am  not  undertaking  to  speak  for  other — I  see  no 
reason  why  that  loan  of  $250,000  should  not  be  paid.  On  the 
other  hand,  I  see  nothing  that  can  be  done  that  will  justify  me,  as 
a  member  of  that  Committee,  in  recommending  the  State  to  put 
$6,000,000  in  there,  or  to  put  $4,000,000  in  there,  with  the  idea 
of  enhancing  the  value  of  the  stocks.  That  is  the  conclusion  I 
came  to.  I  think  the  State  ought  not  to  do  it. 

Mr.  Osgood.  What  do  you  say  about  selling  the  stock? 

Mr.  Stone.  I  don’t  understand,  as  has  been  claimed  here,  that 
the  passage  of  a  resolution  of  that  sort  by  the  legislature,  pla¬ 
cing  it  in  the  hands  of  the  Governor  and  Council,  is  tantamount  to 
a  direction,  on  the  part  of  the  legislature,  for  them  to  hurry  out 
and  sell  that  stock,  or  throw  it  away.  I  expect  they  will  act  with 
that  prudence  and  judgment  that  the  circumstances  of  the  case  call 
for  :  undoubtedly  they  will.  The}7  won’t  do  an}7  thing  of  the  sort. 
My  idea  was  that  it  should  be  placed  somewhere,  so  that  the 
interests  of  the  State  could  be  disposed  of  in  case  the  interests 
of  the  road  required  that  the  owners  of  the  property  should  be 
changed,  having  dismissed  all  idea  that  the  State  will  realize  a 
return  of  what  it  has  invested.  That  was  the  idea  in  my  mind 
upon  that  point 

Another  thing  that  influenced  me  to  a  very  considerable  extent 
in  this  matter  was  the  peculiar  facts  that  are  connected  with  this 
corporation.  It  is  made  up  of  stockholders,  as  you  know,  repret 


76 


APPENDIX. 


[Apr. 


senting  $20,000,000  in  value,  the  larger  part  of  which  is  not  held 
in  Massachusetts,  but  is  held  in  New  York,  I  suppose,  —  the 
majority  of  it.  All  the  parties  holding  that  right  —  that  is,  the 
Berdell  bondholders  —  have  the  power,  at  any  time,  to  come  in 
and  assume  the  management  of  this  road,  the  entire  management 
of  this  road,  at  any  time  :  at  any  meeting  they  may  come  in  and 
oust  the  gentlemen  who  are  now  running  the  road  ;  and,  however 
great  our  confidence  may  be  in  their  management,  —  and  I  have 
confidence  in  it,  —  there  is  not  a  particle  of  certainty  that  —  there 
cannot  be  a  particle  of  certainty  that  they  will  remain  six  months 
longer  in  that  position.  It  may  pass  into  the  hands  of  parties 
who  are  inimical  to  the  interests  that  we  would  like  to  subserve. 

Mr.  Tucker.  The  Eastern  Railroad  is  so  situated  now,  that 
two-thirds  of  the  directors  are  chosen  by  the  bondholders. 

Mr.  Stone.  I  don’t  remember  what  the  proportion  is. 

Mr.  Tucker.  Six  out  of  nine.  If  a  similar  provision  was 
made  here  — 

Mr.  Stone.  You  can’t  have  that  provision  in  this  case. 

Mr.  Tucker.  Supposing  it  could  be  ? 

Mr.  Stone.  This  is  fixed  in  the  Berdell  mortgage.  It  is  en¬ 
tirely  beyond  our  control,  as  even*  matter  of  legislation  is  on  this 
subject.  It  is  a  subject  of  legislation  in  four  different  States. 
This  property  lies  in  Massachusetts,  Rhode  Island,  Connecticut, 
and  New  York.  No  change  can  be  made  in  the  conditions  that 
exist,  without  the  agreement  of  all  those  States. 

Mr.  Stone  of  Newburyport.  One  answer  to  your  proposition 
is,  that,  if  this  mortgage  of  four  millions  were  made  a  first  mort¬ 
gage,  the  trustees  are  in  Boston  —  you  are  in  it,  the  Safety  De- 
pesit  Company.  And,  further  than  that,  if  this  is  consummated, 
the  mortgage  is  a  first  lien  upon  the  road,  and  3*011  don’t  care  who 
the  directors  are,  provided  the  interest  is  paid.  If  your  interest  is 
not  paid,  then  it  is  within  your  control. 

Mr.  Stone  of  Waltham.  That  is  in  answer  to  my  proposition. 
I  said  the  management  of  this  road  might  be  in  the  hands  of  par¬ 
ties  over  whom  we  had  no  control.  It  is  true  that  our  mortgage 
might  give  us  possession  of  the  road  entirety  irrespective  of  the 
management.  That,  of  course,  is  perfectly  true.  If  the}*  did  not 
pay  the  interest,  of  course  we  would  be  forced  to  take  possession. 

There  is  only  one  thing  more  I  want  to  suggest ;  and  that  is,  the 
feeling  I  have  had,  and  it  comes  up  re-invigorated  by  the  experience 
of  ever}*  year.  That  is  this  idea,  that  the  State  should  go  into  the 
development  of  these  interests  by  loaning  its  capital  or  its  credit,  or 
in  any  way  become  entangled  with  the  railroad  interests  of  the  State, 
is  false  political  economy,  and  the  sooner  we  drop  it  the  better.  It 


1878.] 


APPENDIX. 


77 


has  been  a  mistake  from  the  beginning.  I  have  had  the  pleasure 
of  voting  against  it  whenever  I  have  been  in  the  legislature,  and 
the  subject  has  come  up  of  allowing  towns  to  invest  in  railroads. 
I  don’t  believe  in  it  at  all. 

Mr. - .  Are  we  not  in  the  position  of  the  soldier,  who  was 

in  prison,  contraiy  to  law?  We  are  there,  and  can’t  help  our¬ 
selves.  We  have  got  three  millions  in  there  ;  and  the  question  is, 
whether  we  can  get  any  of  it  out. 

Mr.  Stone.  Upon  that  point  my  mind  is  made  up :  I  don’t 
think  we  will.  I  can’t  be  carried  away  with  the  idea,  that,  by 
putting  in  four  or  six  millions  more,  we  shall  get  it  back.  I  don’t 
believe  it.  I  don’t  think  it  is  a  wise  thing  to  do.  I  think  the 
best  thing  that  can  happen  for  this  corporation,  for  the  interests 
of  those  who  are  the  owners  there,  is  for  the  State  to  dissolve  its 
connection  with  it,  and  let  it  pass  into  the  hands  of  those  who  are 
personally  interested  in  the  management,  and  will  look  after  it  as 
private  property  is  always  looked  after. 

Mr.  Bird.  As  a  lawyer,  do  you  think  this  proposition  to  give 
a  first  lien  on  the  road  for  the  security  of  $4,000,000  can  be  made 
effectual  without  the  consent  of  the  legislatures  and  the  courts  of 
this  State  and  the  other  States? 

Mr.  Stone  Well,  I  have  been  inclined  to  think,  in  answer  to 
that,  that  that  matter  could  be  so  arranged.  I  think  it  might  be. 

Mr.  Bird.  With  the  consent  of  the  bondholders. 

Mr.  Stone.  That  is  one  way  of  doing  it.  That  is  not  a  matter 
I  have  very  carefully  considered  ;  but  I  am  inclined  to  that  opinion. 

Mr.  Tucker.  I  should  like  to  ask  a  question  of  some  gentleman 
connected  with  the  road.  I  notice  on  page  5  of  House  Document 
325,  it  speaks  of  some  liabilities  which  are  disputed,  and  do  not 
appear  on  the  books  of  the  present  corporation. 

Mr.  Baldwin.  Those  are  these  various  mortgages,  of  different 
issues. 

Mr.  Tucker.  Which  are  put  on  page  9.  Those  are  all  included 
in  the  four  millions? 

Mr.  Baldwin.  Yes,  sir.  We  did  not  include  those  as  a  debt: 
the}'  are  simply  a  lien  on  a  part  of  the  road.  We  don’t  propose  to 
dispute  them  actualty.  A  large  proportion  of  them  were  made  at 
the  time  when  it  was  supposed  that  a  mortgage  could  be  made  in 
this  Commonwealth  without  legislative  authority.  That  was  de¬ 
cided  in  the  Commonwealth  against  Smith,  that  it  could  not  be 
done.  Some  of  these  wrere  made  prior  to  that  decision,  and  were 
not  so  authorized  ;  but  they  were  authorized  in  Connecticut,  and 
cover  little  parts  of  the  road,  so  that  we  would  consider  it  very  in¬ 
equitable  not  to  pay  them. 


78 


APPENDIX. 


[Apr. 


Mr.  Tucker.  I  thought  those  were  included  ;  but  I  wanted  to 
be  sure.  There  is  not  eight  hundred  thousand  besides  the  four 
millions. 

Mr.  Hart.  On  page  16  of  the  Railroad  Commissioners’  Report 
of  last  year,  you  will  see  the  items  that  make  up  this  $800,000  in 
the  Report  of  last  summer’s  committee.  It  is  the  balance  out¬ 
standing  of  these  different  mortgages. 

The  Chairman.  We  will  continue  hearing  the  remarks  by  mem¬ 
bers  of  the  Committee.  I  will  invite  Mr.  Haynes,  who  was  on  the 
Committee  last  year  to  address  this  Committee. 

Remarks  of  Tilly  Haynes. 

Mr.  Haynes.  Mr.  Chairman,  I  don’t  know  that  I  can  say  any 
thing  that  has  not  been  already  said,  and  better  said,  by  Mr. 
Stone,  our  Chairman. 

In  looking  over  this  matter,  we  endeavored  to  do  so,  as  far  as 
I  was  concerned,  in  a  business-way.  We  found  that  this  railroad, 
according  to  the  Report  of  the  Railroad  Commissioners,  was  earn¬ 
ing  the  interest  on  a  valuation  of  about  $11,000  per  mile;  was 
earning  a  fair  income,  at  the  outside,  on  about  $11,000  per  mile. 
We  found,  on  examination,  that  probably  we  were  getting  to  the 
full  extent  all  the  business  from  that  property  ;  that  it  could  not 
be  materially  changed  or  materially  increased.  We  found,  that,  in 
order  to  go  through  to  Fishkill  under  the  original  proposition  of 
$6,000,000,  that  $6,000,000  would  be  required  to  build  the  road  to 
Fishkill  or  Poughkeepsie.  Poughkeepsie  was  the  final  point, 
because  the  bridge  is  to  be  built  there :  that,  perhaps  would  be 
the  point  that  was  rather  suggested,  although  no  point  was  fixed 
upon.  They  might  go  to  Fishkill  or  Poughkeepsie,  or  farther 
down  towards  New- York  City.  At  Poughkeepsie  they  were  build¬ 
ing  a  bridge ;  and  that,  perhaps,  would  be  the  point.  But,  when 
you  get  to  Poughkeepsie,  there  is  a  road  running  from  Hartford  to 
Poughkeepsie,  without  the  aid  which  you  are  asked  to  give,  and 
which  to-day  is  not  worth  probably  a  dollar. 

M.  - .  What  road  is  that? 

Mr.  Haynes.  The  Western  Connecticut  Road.  It  has  gone 
from  the  stockholders  to  the  second  bondholders;  and  I  don’t 
know  what  the  value  of  the  present  bonds  is.  So,  to  get  through 
this  extension,  $6,000,000  is  called  for;  and  to  build  a  road  to 
Poughkeepsie  is  simply  to  have  two  roads  where  one  cannot  live 
now. 

In  going  over  that  road  from  Waterbury  to  Fishkill,  we  found 
that  every  village  we  came  to  where  there  was  water-power,  or 
facilities  for  manufacture,  already  had  either  water  or  railroad  con- 


1878.] 


APPENDIX. 


79 


nection  direct  with  the  Sound  or  New  York ;  and,  so  far  as  addi¬ 
tional  facilities  went,  they  were  better  off  to-day  than  they  could 
be  with  this  proposed  road  ;  and,  so  far  as  any  additional  business 
goes,  I  don’t  think  there  is  a  possibility  of  a  dollar  ever  coming 
from  it.  I  feel  strongly  about  that,  because  I  have  taken  some 
pains  to  examine  it.  The  present  road  cannot  pay  its  running 
expenses.  That  is  a  pretty  good  argument  that  there  isn’t  any 
business  to  be  got. 

The  next  fact  brought  to  my  mind  was,  that  this  might  be  a  great 
coal-distributing  road  ;  and  I  took  some  pains  to  hunt  that  up, 
and  found  coal  delivered  at  New  York,  Bridgeport,  Norwalk,  and 
New  Haven,  at  the  same  price ;  delivered  at  any  of  those  points 
without  any  additional  charge  over  delivery  in  New  York.  That 
seemed  to  be  rather  a  faint  hope  for  business.  I  looked  to  see  if 
the  connection  with  the  New-York  and  Erie  Road  would  give  them 
any  business,  and  found  that  the  business  of  that  road  goes  to 
Jersey  City ;  and  from  there  the  outside  Metropolitan  Steamship 
Company  to  Boston  was  doing  business  lower,  probably,  than  any 
railroad  would  care  to  do  it.  It  didn’t  seem  to  my  mind  that 
there  is  a  possible  chance  for  any  additional  business  to  pay  for 
the  expense  of  building  through  to  Poughkeepsie  or  Fishkill. 

Coming  down  to  the  point  of  valuation  of  the  property :  the 
Railroad  Commissioners,  in  their  Report  of  last  year,  state,  as  I 
say,  that  it  is  about  $11,000  a  mile  ;  and  the  underlying  indebted¬ 
ness  is  over  $14,000  a  mile.  It  don’t  seem  to  me  possible  that 
there  is  any  great  margin  for  income.  The  total  indebtedness, 
throwing  out  the  Berdell  bonds,  throwing  out  all  the  present 
stock,  —  with  twenty  million  of  stock  and  bonds  wiped  out,  the 
indebtedness  to-day  is  $14,000  a  mile.  I  could  not  see  any  mar¬ 
gin  for  the  State  to  make  any  loan  upon  the  property. 

The  $4,000,000  asked  for  is  rather  a  complicated  proposition. 
It  was  made  by  one  of  the  Committee,  and  seemed  to  me  very 

complicated.  I  did  not  see  where  help  was  to  come  from  that. 

It  really  puts  the  corporation  in  no  better  condition  than  it  is  in 
to-day :  it  simpl}’  unloads  the  whole  indebtedness  on  to  the  State. 
I  could  not  see  anj'  benefit  to  be  gained  by  the  State,  or  any  par¬ 
ticular  benefit  to  be  gained  by  the  corporation. 

In  relation  to  the  matter  which  one  of  the  Committee  suggested 
here,  I  think,  perhaps,  I  may  have  suggested  the  last  phrase  in 
the  Report.  It  was  done  wholly  with  the  idea  of  assisting  the 

management  of  this  road.  They  have  great  confidence  in  the 

ability  of  the  road  to  extricate  itself,  and  become  a  valuable  road  : 
they  certainly  have  bond-holders  enough  who  are  able  to  bu}'  the 
road,  and  own  it.  If  the}’  have  got  confidence  enough  in  the 


80 


APPENDIX. 


[Apr. 

ability  of  the  road  to  become  valuable,  it  seems  to  me  the}7  should 
put  it  in  such  condition  that  they  could  purchase  it,  and  re-organ¬ 
ize  the  road,  and  make  it  valuable,  if  the}^  have  confidence  and 
believe  in  it. 

This  last  paragraph,  I  say,  was  put  in  with  the  idea,  —  not  with 
the  idea  of  forcing  the  stock  on  the  market,  but  simply  to  allow 
any  syndicate  that  might  be  formed,  any  new  organization  that 
might  be  made,  to  have  this  property  pass  into  their  hands.  I 
don’t  think  there  was  a  man  on  the  Committee  that  discussed  this, 
I  don’t  think  there  was  an  individual  on  the  Committee,  but  what 
felt,  that  if  these  new  ten-million  bonds  should  be  taken,  or  if  six 
millions  should  be  taken,  the  entire  stock  and  bonds  at  present 
existing  would  be  wiped  out.  I  can’t  see  any  other  lookout,  any 
other  possible  contingencj7,  that  the  ten  millions  now  authorized, 
if  disposed  of  b}^  the  State  taking  them,  or  by  selling  them  at 
eight3*  or  sixty,  so  much  the  worse :  I  can’t  see  but  they  are  going 
to  own  the  property,  and  the  present  stock  and  bond  holders  will 
be  entirely  wiped  out. 

I  don’t  know  any  thing  particular  to  say,  more  than  these  facts 
which  guided  me  in  my  vote  on  the  matter.  If  there  is  any  thing 
that  the  gentlemen  desire  to  ask,  I  will  endeavor  to  answer  them. 

Mr. - .  Did  the  proposition  of  four  millions  originate  with 

the  managers  of  the  road  ? 

Mr.  Haynes.  No,  sir :  one  gentleman  of  the  Committee  sug¬ 
gested  that  as  possibly  being  an  opportunity  to  assist  them. 

Mr. - I  noticed  the  managers  put  six  millions  forward,  and 

the  Committee  discussed  four  millions. 

Mr.  Haynes.  I  don’t  think  that  came  from  any  gentleman  of 
the  company,  not  from  any  officer  of  the  company. 

It  is  rather  a  complicated  road.  There  was  some  suggestion 
that  some  economy  might  be  made  by  putting  the  two  roads 
together.  Two  of  our  Committee  went  over  to  Hartford,  and 
found  the  Hartford,  Providence,  and  Fishkill  Road  a  very  well- 
managed  road.  I  think,  after  paying  their  expenses,  which  are 
very  small  (while  about  the  present  length  of  the  New-York  and 
New-England,  the  expenses  of  management  I  think  are  about  one- 
third  of  what  the  New-York  and  New-England  management  is),  — 
it  is  well  managed,  and  with  economy  ;  and  in  nine  years  they  have 
managed  to  pay  off  about  $52,000  of  indebtedness :  so  the  mar¬ 
gin  there  don’t  seem  to  be  very  large. 

Mr. - .  You  think  the  present  stockholders  and  bondholders 

would  be  wiped  out,  if  the  road  is  able  to  place  its  new  mortgage? 

Mr.  Haynes.  Yes,  sir. 


1878.] 


APPENDIX. 


81 


Mr. - .  How  do  I  understand  the  present  mortgages  would 

be  wiped  out  when  they  put  on  another  mortgage  ? 

Mr.  Haynes.  I  don’t  mean  the  original  bonds,  the  old  bonds 
before  the  Berdell  bonds,  I  mean  the  Berdell  mortgage-bonds,  by 
the  ten  millions  of  new  bonds. 

Mr. - .  Where  do  you  get  those  figures  ?  Can  you  tell,  so 

we  can  find  the  same  figures  }'ou  have  given  us,  —  $14,000  a  mile, 
and  $11,000  a  mile? 

Mr.  Haynes.  Look  at  the  Railroad  Commissioners’  Report, 
page  6,  House  Document,  325,  you  will  find  there  they  fix  the 
valuation  at  about  $10,000  or  $11,000  a  mile. 

Mr. - .  If  that  is  so,  then  the  road  cannot  pay  a  fair  inter¬ 

est  on  the  debt. 

Mr.  Haynes.  I  don’t  think  it  pays  interest  on  the  entire  debt. 
I  think  there  are  some  bonds  the}7  are  not  pa\ring  interest  on. 

Mr.  Baldwin.  No  bonds  that  the  corporation  owe.  The  two 
roads  are  now  paj’ing  interest  on  $3,000,000.  as  near  as  can  be 
estimated. 

Mr.  Haynes.  That  takes  up  about  all  the  income  there  is. 
When  you  come  to  pay  interest  on  $4,000,000,  I  don’t  see  where 
the  margin  for  improvements  on  the  road  is. 

I  don’t  know  as  there  is  any  thing  else  I  have  to  suggest. 

Remarks  of  Levi  C.  Wade. 

The  Chairman.  The  Committee  will  listen  to  Mr.  Wade. 

Mr.  Wade.  Mr.  Chairman  and  gentlemen,  I  don’t  know  ex- 
actl}7  the  purpose  of  the  Committee  in  calling  us  before  them 
to-day  ;  but,  .if  there  is  any  information  I  can  give  them,  I  shall  be 
very  happy  to  do  so. 

The  Chairman.  The  subject  before  the  Committee  is  the  Re¬ 
port  of  the  Committee.  We  find  }’ou  subscribe  to  what  is  on  the 
last  page  of  the  Report.  We  should  like  to  get  your  views  more 
fully. 

Mr.  Wade.  Whether  you  wish  to  get  information  as  to  facts, 
or  have  me  express  my  views  on  the  general  subject  from  what 
acquaintance  I  have  of  the  facts  ? 

The  Chairman.  Your  views,  your  judgment,  as  to  what  should 
be  done  in  answer  to  this  question :  “  What  action  it  is  expedient 
for  the  State  to  take  in  relation  to  its  investment  in  the  stock  and 
securities  of  the  New-York  and  New-England  Railroad  Company.” 

Your  judgment  formed  from  your  investigation. 

Mr.  Wade.  I  shall  have  to  make  a  very  brief  statement,  and 
on  the  question  generally. 


82 


APPENDIX. 


[Apr. 


In  my  judgment,  the  legislature  would  make  a  very  grave  mis¬ 
take  if  they  should  adopt  any  such  legislation  as  has  been  recom¬ 
mended  by  the  majority  of  the  Committee  of  last  year.  As  I 
understand  the  majority  of  that  Committee,  they  recommend  sub¬ 
stantially  that  the  stock  held  by  the  State  shall  be  sold  by  the 
Governor  at  his  discretion.  As  soon  as  any  such  action  as  that  is 
taken,  of  course  we  all  know  what  the  effect  will  be,  —  the  market- 
value  of  that  stock  will  fall  so  low,  that  the  State  will  realize  little 
or  nothing  from  the  sale  of  the  stock.  If  we  go  no  further  than 
simply  sit  still  and  hold  on  to  the  stock,  I  should  say  it  was  much 
better  than  it  would  be  to  adopt  the  recommendation  of  the  major¬ 
ity.  It  is  a  good  deal  like  a  man  offering  me  a  dollar  for  the 
security  I  hold  for  a  $1,000.  Perhaps  it  may  not  be  worth  more 
than  a  dollar ;  but  I  prefer  to  hold  on  to  the  security,  if  I  lose  the 
dollar,  and  take  the  chance  of  its  being  worth  more  in  the  future. 
If  you  didn’t  propose  to  go  any  further,  I  should  say  right  off  that 
it  was  extremely  poor  policy  for  the  State  to  throw  its  stock  on 
the  market  at  the  low  price  it  would  get.  I  do  think  the  State 
might  do  something  more  practical  than  to  sit  still,  and  let  things 
remain  in  statu  quo ,  so  far  as  the  State  is  concerned. 

I  am  not  in  favor  of  the  State  loaning  this  corporation  sufficient 
money  to  pay  off  the  underlying  indebtedness,  and  get  the  control 
of  the  road  in  the  New-York  and  New-England  Railroad  Company, 
unless  there  can  be  certain  concessions  made  that  will  guarantee 
the  State  against  loss. 

The  concessions  that  I  allude  to,  and,  to  my  mind,  indispensable 
to  our  security  in  undertaking  an}’  such  enterprise,  are  these:  — 

That  there  should  be  such  legislation  as  would  give  the  State 
the  right  to  elect  a  majority  of  the  directors  of  that  corporation,  or 
any  subsequent  corporation  that  might  be  formed,  until  the  last 
dollar  that  had  been  loaned  by  the  State  had  been  repaid ;  and 
that  these  directors  must  be  elected,  not  by  the  legislature,  as 
the  State  Directors  of  the  Boston  and  Albany  Railroad  are  elected, 
—  which  always  seemed  to  me  about  as  poor  a  way  of  electing 
such  officers  as  could  be  devised,  —  but  nominated  by  the  Governor, 
and  either  confirmed  by  the  Council  or  the  Senate :  the  latter  I 
should  think  was  preferable ;  at  any  rate  nominated  by  the  Gov¬ 
ernor,  and  confirmed  by  some  other  body.  Have  the  direct  respon¬ 
sibility  in  some  third  person,  who  would  no  doubt  select  men  of 
railroad  experience,  of  character  and  integrity,  sufficient  to  fill 
such  a  position.  I  do  not  mean  to  cast  any  reflections  on  the 
gentlemen  who  fill  such  positions  on  the  Boston  and  Albany  Road  ; 
merely  to  comment  on  the  manner  of  selecting  men  for  such  posi¬ 
tions. 


1878.] 


APPENDIX. 


83 


If  anj7,  such  loan  is  made,  the  Commonwealth  should  have  the 
right  of  naming  the  majority  of  the  directors,  and  name  them  in 
such  a  manner  as  to  insure  that  the  management  would  remain  in 
competent  hands.  Then  I  think  it  might  be  well  for  us  to  unite 
on  a  proposition  somewhat  similar  to  the  proposition  recommended 
by  Col.  E.  F.  Stone,  which  I  suppose  he  has  fully  explained  to 
you,  the  proposition  which  I  think  was  the  second  one  mentioned 
in  this  Report.  I  agreed  substantially  with  that  proposition,  pro¬ 
vided  we  should  first  have  these  guaranties. 

I  was  told  by  a  gentlemen  familiar  with  this  subject,  that  it  was 
substantially  impossible  for  us  to  obtain  any  such  guaranty.  If 
that  is  the  case,  I  am  certainly  opposed  to  the  State  assuming  the 
risk  and  burden  of  lifting  this  enterprise  out  of  its  present  difficul¬ 
ties. 

It  appeared  to  me,  from  the  best  information  I  can  get  in  regard 
to  this  road  and  its  properties,  — not  simplj-  the  line  from  Boston 
to  Willimantic,  but  the  entire  line,  including  the  Hartford,  Provi¬ 
dence,  and  Fishkill,  — it  seemed  to  me  that  there  was  real  value 
there ;  that  there  was  an  opportunity  to  lift  that  enterprise  into  a 
position  where  some  return  might  be  had  from  it,  —  some  substan¬ 
tial  return.  I  think  it  is  a  desirable  thing  that  all  the  underlying 
liens  should  be  consolidated  in  one  permanent  debt,  and  that  the 
whole  enterprise  should  be  put  under  one  responsible  management. 

Now,  I  think  this  is  a  purely  business  proposition.  The  Com¬ 
monwealth  is  interested  to  a  large  extent,  owns  more  than  one- 
sixth  of  the  entire  stock,  even  when  the  Berdell  bonds  shall  all 
have  been  converted  into  stock.  There  are  other  parties  interested 
to  a  large  extent ;  and  it  seems  to  me  under  those  circumstances 
the  sensible  thing  for  the  parties  who  are  the  most  largely  inter¬ 
ested  to  form  a  combination,  and  take  all  the  securities  there  are, 
take  all  the  bonds  under  this  new  ten-million  mortgage,  —  the 
bonds  of  which  have  been  prepared,  and  some  of  them  issued,  — 
take  them  all  as  security,  and  advance  what  money  is  necessary  to 
pay  off  all  the  underlying  liens  and  floating  indebtedness,  get  con¬ 
trol  of  the  road,  put  it  in  good  condition  to  run,  and  then  run  it. 
If  such  action  is  taken  by  those  parties  as  I  have  indicated,  every 
dollar  that  was  put  in  would  go  into  the  road,,  or  into  the  present 
indebtedness  of  the  road,  because  it  would  be  controlled  and 
expended  by  the  very  parties  who  were  putting  it  in.  I  can  see 
that  there  is  an  opportunity  in  that  enterprise  to  make  money. 

Mr. - .  Who  are  the  parties  who  are  interested? 

Mr.  Wade.  Other  than  the  Commonwealth? 

Mr. - .  As  you  used  the  expression,  who  do  }Tou  mean? 

Mr.  Wade.  I  don’t  know  that  I  could  name  them  all  now.  I 


84 


APPENDIX. 


[Apr, 


mean  those  who  own  the  stock  of  the  present  New-York  and  New- 
England  Railroad  Company,  or  Berdell  bonds,  which  I  speak  of  as 
stock ;  for  they  are  simply  of  value  for  the  purpose  of  transferring 
into  stock,  —  the  twenty-million  Berdell  bonds.  Those  are  the  par¬ 
ties  that  I  refer  to. 

In  my  judgment  a  syndicate  could  be  formed  of  fifteen  or 
twenty  persons,  including  the  State,  who  might  contribute  in  the 
same  degree  or  proportion  as  their  respective  interests  :  of  course 
they  would  have  to  contribute  more  than  their  actual  interest,  as 
a  great  many  holders  of  small  lots  of  stock  and  bonds  would  not 
feel  like  contributing  money  now.  Those  parties  going  into  that 
in  that  way  might  take  the  enterprise,  and  carry  it  to  such  a  stage 
as  would  make  it  profitable  to  some  extent,  and  bring  a  substan¬ 
tial  return  to  the  stockholders ;  and  there  could  be  some  value 
given  to  the  stock.  And  if  that  failed,  if  no  value  was  given  to 
the  stock,  such  a  course  as  that  would  limit  the  result  to  those 
parties  who  had  taken  the  ten  million  of  bonds,  and,  by  a  fore¬ 
closure  of  the  mortgage,  they  would  take  all  there  was  in  the  road. 
So  that  the  State,  in  the  event  that  the  stock  was  wiped  out, 
would,  by  its  general  ownership  with  others  in  the  ten  million  of 
bonds,  would  eventually  get  the  same  enterprise  in  a  paying  form, 
while  it  is  now  where  it  is  not  a  paydng  enterprise. 

All  such  negotiations  are  of  a  somewhat  delicate  nature ;  and 
a  great  many  gentlemen  of  large  means  who  are  interested  in 
enterprises  of  this  sort  do  not  like  to  discuss  before  the  public 
the  means  and  measures  they  would  like  to  take  to  get  out  of 
difficulties  such  as  this  road  is  in ;  and  I  think  it  would  be  a  good 
thing  to  intrust  with  the  Governor  of  the  Commonwealth,  partic¬ 
ularly  if  the  Governor  had  as  much  business-judgment  and  busi¬ 
ness-experience  as  the  present  Executive  of  the  Commonw  ealth. 
I  would  intrust  him  with  the  task  of  conferring  with  the  gentlemen, 
and  see  whether  an  arrangement  of  this  sort  could  be  made ;  and 
if  he  found  it  could  be,  and  seemed  desirable,  he  might  so  recom¬ 
mend  to  the  legislature.  There  is  always  that  misfortune,  that  the 
btate  can  take  no  step  without  public  discussion :  that  is  some¬ 
thing  that  cannot  be  helped ;  and  we  have  got  to  make  the  best 
we  can  of  it.  The  negotiations  in  the  first  instance,  if  conducted 
at  all,  must  be  conducted  by  some  one  person. 

The  Committee  will  find  in  the  Report  a  proposition  of  that  sort, 
which  was  considered  by  the  Committee  of  last  year.  It  may  be 
found  on  page  7  of  the  Report :  — 

“  It  was  also  proposed  that  the  State  should  join  a  syndicate  to  take  all 
the  ten-million  mortgage-bonds  as  security,  and  advance  the  money  neces¬ 
sary  to  pay  all  liens  and  outstanding  indebtedness ;  to  secure  control  of  all 


1878.] 


APPENDIX. 


85 


the  property  under  one  management,  and  put  the  entire  line  in  good  run¬ 
ning  order;  the  amount  to  be  advanced,  and  the  percentage  the  State 
should  contribute,  to  be  a  matter  of  negotiation  and  future  action ;  the  Gov¬ 
ernor  to  be  requested  to  confer  with  other  parties  interested  in  the  enter¬ 
prise  in  relation  thereto.” 

That  was  substantially  my  proposition  ;  and  I  believe  I  was  the 
only  person  on  the  Committee  who  voted  in  favor  of  it.  It  is  the 
proposition  I  refer  to  in  the  paragraph  added  to  the  majority  re¬ 
port. 

I  don’t  know  as  I  have  any  thing  further  to  add. 

Mr. - .  If  Mr.  Haynes  is  right,  the  valuation  of  $11,000 

is  less  than  the  indebtedness,  which  is  $14,000  a  mile.  If  that  is 
correct,  how  do  you  see  any  margin  for  the  State  to  put  in  any 
more  money? 

Mr.  Wade.  I  shouldn’t  think  there  was.  I  should  not  think 
that  was  correct. 

Mr. - .  Assuming  these  figures  to  be  correct. 

Mr.  Wade.  Assuming  those  figures  to  be  correct,  I  should 
want  to  look  it  over  very  carefully  before  I  put  in  any  more 
money.  If  the  road  is  loaded  down  with  a  debt,  if  it  has  a  debt 
which  is  larger  than  its  value,  there  would  need  to  be  a  great  deal 
of  caution  and  prudence  in  putting  any  more  money  in.  But  I 
would  not  say,  that,  in  that  case,  I  would  not  put  an}’  more  money 
in.  I  would  not  say,  that  if  I  had  a  mortgage  on  a  man’s  land 
and  building,  and  the  building  was  incomplete,  that  I  would  not 
put  more  money  into  it  for  the  sake  of  giving  value  to  it.  I 
should  want  to  look  into  it  very  carefully.  But  I  do  not  accept 
those  figures  at  all.  I  am  very  incompetent  to  speak  on  that 
point.  I  never  was  connected  with  railroad  management,  and  do 
not  claim  to  have  any  special  ability.  I  am  satisfied,  on  the  best 
information  I  could  get  from  railroad  experts,  particularly  from 
the  opinion  of  the  Railroad  Commissioners,  that  the  road  is  worth 
much  more  than  $11,000  a  mile,  even  in  these  hard  times. 

Mr. - .  He  stated  that,  as  the  finding  of  the  Railroad  Com¬ 

missioners. 

Mr.  Osgood.  On  page  6  of  their  Report,  the  Railroad  Com¬ 
missioners  say,  — 

“Judged  by  it,  however,  the  appraised  value  of  this  road,  as  now  equipped 
and  operated,  would  not  probably  exceed  $11,000  a  mile.” 

Mr.  Hart.  If  Mr.  Osgood  will  read  what  precedes  that,  he  will 
see  that  substantially  they  estimate  the  value  at  $36,000  a 
mile.  That  is  their  own  estimate  upon  it.  It  is  all  correct  as  it 
is  stated :  if  you  will  look  upon  page  18  of  the  Commissioners’ 
Report,  you  will  get  their  valuation. 


86 


APPENDIX. 


[Apr. 


Mr.  Wade.  It  was  discussed  in  our  Committee.  As  I  under¬ 
stand  the  opinion  of  the  Railroad  Commissioners  upon  that  point, 
they  mean  by  this  sentence  just  this, — taking  the  road  as  now 
equipped  and  operated,  — the  New-York  and  New-England  Road, 
—  I  don’t  remember  whether  they  included  the  Hartford,  Provi¬ 
dence,  and  Fishkill  Road ;  but  under  the  present  circumstances, 
judged  by  the  earning  value,  it  probably  would  not  be  worth  more 
than  $11,000  a  mile.  That  is  a  very  different  thing  from  the 
value  of  that  piece  of  property  after  the  roads  are  consolidated 
under  one  management.  As  I  said  before,  that  is  a  subject  on 
which  I  had  to  depend  very  largely  upon  the  opinion  of  others. 

Mr. - .  What  bill  could  be  passed  to  bring  that  about? 

Mr.  Wade.  I  should  recommend  that  a  resolve  be  passed  con¬ 
taining  substantially  the  words  I  have  read  from  page  7  of  the 
Committee’s  Report, — that  the  Governor  confer  with  other  parties 
interested  in  the  New-York  and  New-England  Railroad  with  refer¬ 
ence  to  the  formation  of  a  syndicate  to  advance  the  money  neces¬ 
sary  to  pay  off  the  underlying  liens,  outstanding  indebtedness, 
and  secure  control  of  the  property  under  one  management,  and 
put  the  line  in  good  funning  order,  the  percentage  that  should  be 
contributed  by  the  various  parties,  and  the  security  which  should 
be  given.  I  could  word  it  in  a  very  short  time. 

Mr.  - .  I  wish  you  would  do  the  Committee  the  favor  to 

get  up  a  resolution  of  that  kind. 

Mr.  Wade.  It  will  not  require  a  great  deal  of  ingenuity  to  do 
that. 

Remarks  of  F.  W.  Bird. 

Mr.  F.  W.  Bird.  I  hardly  know  what  I  am  wanted  for  here, 
and  am  still  worse  off  in  being  unfit  to  say  an}’  thing. 

In  relation  to  this  matter  of  the  estimate  of  thfr  Railroad  Com¬ 
missioners,  you  will  find  that  the  Railroad  Commissioners  do  not 
say  that  this  road  is  worth  $36,000  a  mile,  or  any  thing  like  it.  In 
making  an  arbitrary  valuation,  it  was  put  down  at  $36,000  a  mile. 
They  do  say  that  it  earned  on  a  debt  of  $11,000  a  mile.  In 
another  place  they  say  the  net  earnings  would  seem  to  be  about 
$100,000  a  year  :  that  is  what  they  say  are  the  facts.  There  is  an 
arbitrary  valuation  of  $36,000  a  mile. 

Now  it  seems  to  me  that  the  proposition  of  my  friend  who  has 
just  sat  down  illustrates  the  difficulties  of  this  question,  and,  allow 
me  to  say  with  all  respect,  the  absurdity  of  any  attempt  at  rem¬ 
edy ;  that  is,  that  the  State  of  Massachusetts  should  go  into  a 
syndicate  with  J.  Gould,  William  Vanderbilt,  and  those  fellows  in 
New  York,  to  see  if  it  can’t  get  more  money  out  of  this  road  than 


1878.] 


APPENDIX. 


87 


they  get.  I  don’t  think  anybody  in  this  legislature  would  vote 
for  such  a  proposition  as  that :  they  would  not  discuss  it. 

There  is  one  gentleman,  Mr.  Wade,  thinks  that  it  would  be 
a  great  advantage  to  put  into  this  arrangement  a  provision 
that  the  State  should  have  a  majority  of  the  directors.  The 
State  has  had  a  majority  of  the  stock  for  the  last  two  }Tears,  and 
has  been  chosing  the  directors ;  it  has  owned  three-fifths  of  the 
stock  or  more,  and  could  have  chosen  ever}1,  one  of  the  directors 
if  the}7  wanted  to.  Then  was  the  time  to  assert  their  power  if 
it  was  thought  desirable  for  the  interests  of  the  State  to  do  it ; 
but  the}T  didn’t  do  it.  They  have  two  or  three  respectable  gentle¬ 
men  on  the  Board  who  are  supposed  to  represent  the  interests  of 
the  State  :  I  don’t  understand  they  constitute  a  numerical  majority 
of  the  Board,  although,  perhaps,  a  majority  of  the  brains  of  the 
Board. 

After  all  that  has  been  said  in  favor  of  a  loan  of  $4,000,000, 
all  that  can  be  said  is,  that  we  can  borrow  mone}^  at  four  or  five 
percent,  and  lend  it  to  this  road  at  seven  per  cent,  with  a  fair 
prospect  of  getting  seven  per  cent  on  it,  as  the  Report  says  that 
it  will  pay  the  interest  on  $4,000,000. 

I  think,  Mr.  Chairman,  and  I  submit  to  }’OU  as  business-men, 
that  if  the  State  is  to  go  into  such  an  operation  as  that  to  save 
money,  at  least,  by  lending  it  to  the  Boston,  Hartford,  and  Erie 
Railroad,  I  think  we  had  better  lend  four  millions,  or  ten  or  twelve, 
or  fifteen  or  twenty  millions,  just  as  well  as  four,  on  other  property 
in  the  State  which  is  just  as  good  security  as  it  would  get  here, 
with  a  prospect  of  getting  its  money  back.  If  that  is  the  way  the 
State  is  to  get  out  of  the  loan  which  it  has  already  made,  it  is  a 
foolish  operation  ;  but,  if  they  are  going  into  it,  they  can  get  better 
securit}7,  in  my  judgment,  than  this  road  offers.  It  could  simply 
take  a  first  mortgage  on  first-class  propert}’,  which  they  could  do 
anywhere  at  six  or  seven  per  cent :  that  would  be  a  more  profita¬ 
ble  operation  than  this  would  be. 

Mr. - .  Would  that  proposition  be  true  at  the  present  time, 

that  you  could  not  get  a  mortgage  on  propert}’  at  less  than  seven 
per  cent?  Would  it  be  true  that  good  property  could  not  be 
mortgaged  for  less  than  seven  per  cent  ? 

Mr.  Bird.  To-da}7  I  don’t  suppose  first-class  mortgages  would 
bring  seven  per  cent.  But  that  has  been  the  case.  The  State 
could  go  into  other  operations,  and  make  more  monej’  than  in  this, 
and  with  better  security. 

The  trouble  about  this  matter  all  the  way  through,  in  this  Report, 
was,  we  were  dealing  with  uncertain  premises.  This  matter  of 
surplus  revenue  of  this  road  ;  that  has  been  criticised  somewhat. 


88 


APPENDIX. 


[Apr. 


There  is  a  difficulty,  which  the  gentlemen  on  the  Committee  met, 
and  which  we  tried  all  summer  to  solve,  and  failed,  —  that  was, 
What  portion  of  this  nominal  surplus,  apparent  surplus  of  $180,000, 
has  really  gone  into  permanent  improvements  which  can  be  dis¬ 
pensed  with  hereafter?  That  is  the  trouble  with  all  roads.  All 
roads  make  returns  of  a  surplus  revenue.  You  see  it  in  nearly  all 
the  returns.  There  are  very  few  of  them  that  have  that  surplus 
revenue  in  money,  or  investments  that  are  convertible  into  money, 
for  the  payment  of  debts,  or  for  the  payment  of  interest  on  debts. 
There  is  the  trouble,  and  there  is  the  trouble  in  this  case.  I  tried, 
according  to  my  ability,  all  summer,  to  find  out  what  was  the  fact 
in  regard  to  this  road,  and  could  not.  If  I  may  be  allowed  to  say 
it,  I  tried  very  hard  indeed  to  get  an  expert  to  go  on  to  the  road, 
immediately  after  our  appointment,  who  should  go  over  every  foot 
of  the  road,  on  foot  and  alone,  and  examine  the  condition  of  every 
rail  and  every  tie,  and  every  rod  of  the  improvements  on  the 
road-bed,  every  bridge,  and  every  culvert,  station-houses,  and 
cars,  and  give  us  an  estimate  that  was  perfectly  trust  worth}7  as  to 
the  actual  value  of  the  property  to-day,  and  what  the  probability, 
or,  rather,  the  certainty,  must  be,  if  that  could  be  ascertained,  as  to 
the  expenditures  that  must  be  made  to  keep  it  in  proper  condition. 
But  the  Committee  thought  it  was  unnecessary,  and  it  was  not  done. 
The  last  part  of  the  time,  when  the}7  come  to  put  in  the  exhibit, 
we  found  ourselves  deficient  in  that  very  information.  We  gave 
instructions  to  a  sub-committee  to  select  such  a  man ;  but  they 
didn’t  give  the  man  the  instructions  that  the  Committee  gave  them, 
and  we  didn’t  get  any  information  that  was  worth  any  thing. 
There  is  the  difficulty^ 

When  I  find  that  this  road  has  been  increasing  its  debt  for  the 
last  ten  years  constantly  (I  think  it  is  true  that  it  always  owed 
more  money  at  the  end  of  the  year  than  it  did  at  the  beginning) , 
when  I  find,  that  in  the  last  two  years,  since  it  passed  into  the 
hands  of  the  present  management,  it  has  been  selling  its  bottom 
bonds  for  eighty,  I  don’t  believe  good  managers,  as  these  gentle¬ 
men  are  reputed  to  be,  —  I  don’t  believe  good  managers  of  a  piece 
of  property  like  this  would  sell  such  bonds  at  eighty,  if  it  had  a 
surplus  revenue,  which  was  available,  to  be  applied  to  the  same 
purpose.  That  is  the  fact. 

Now,  so  far  as  appears,  there  has  not  a  dollar  gone  into  this 
road  for  the  last  two  years,  in  the  way  of  improvement,  which  was 
not  needed.  There  has  been  a  few  miles  of  extra  steel  rail  laid  ; 
but  I  think  more  than  the  money  spent  has  been  realized  from  the 
sale  of  bonds.  From  the  net  earnings  of  the  road,  I  don’t  think 
any  thing  has  been  expended  more  than  to  keep  up  the  condition 


1878.] 


APPENDIX. 


89 


of  the  road.  So  far  as  learned,  so  far  as  my7  judgment  goes,  mv 
knowledge  of  railroad  management,  and  knowledge  of  the  condi¬ 
tion  of  this  road,  there  is  no  probability,  hardly  a  possibility,  that 
it  will  not  need  quite  as  large  an  amount  expended  upon  it  yearly7, 
for  the  next  ten  years,  as  has  been  expended  upon  it  during  the 
five  or  ten  years  last  past.  In  other  words,  the  necessary7  expendi¬ 
tures  for  repairs  and  improvements  must  continue  to  be  the  same 
for  the  next  five  or  ten  years.  I  have  not  the  shadow  of  a  doubt 
about  it,  and  that  they  will  absorb  the  whole  of  the  earnings  of 
this  road.  And  there  is  nothing  in  the  way  of  proof  that  appears 
to  the  contrary7,  only  the  fact  that  there  appears  on  the  books  to 
be  a  surplus  of  $180,000.  There  has  appeared  to  be  just  as  large 
a  surplus  in  y7ears  past,  and  always  can  ;  but  there  has  never  one 
dollar  appeared  to  be  available  for  the  payment  of  debts,  or  for 
the  payment  of  interests  on  debts. 

Now,  my  friend  from  Newbmyport  made  one  proposition  which 
was  considered  by7  the  Committee  :  that  was  the  loan  of  $4,000,000 
on  the  pledge  of  $5,500,000  of  bottom  bonds,  costing  us,  as  we 
supposed,  $200,000  a  y7ear,  and  netting  us  $385,000.  Now  he 
makes  a  different  proposition,  — for  the  loan  of  $4,000,000  on  a 
bottom  mortgage,  on  the  pledge  of  the  entire  earnings  of  the  road, 
with  a  pledge  of  the  bonds.  Mr.  Hart  suggests  that  they  might 
as  well  be  all  pledged  for  the  loan  of  that  $4,000,000,  —  a  bot¬ 
tom  mortgage,  a  good  lien  on  the  whole  road.  Does  anybody 
suppose  that  the  stockholders  of  the  road,  or  the  other  bondholders 
of  the  road,  the  trustees  of  the  bondholders,  those  persons  whose 
business  it  is  to  look  after  the  interests  of  the  road,  are  going  to 
consent  to  that,  —  that  the  State  shall  take  the  entire  proceeds  of 
that  road,  have  a  prior  lien  on  the  whole  earnings  of  the  road 
to  pay7  the  interest  on  a  loan  of  $4,000,000?  It  confessedly  does 
not  relieve  them  in  the  slightest  degree  from  embarrassment :  it 
only  transfers  the  indebtedness  from  wherfe  it  is  to-day,  —  scattered 
all  over  New  England  and  New  York,  with  Tom,  Dick,  and 
Harry7,  —  and  transfers  it  to  the  State.  I  don’t  believe  the  bond¬ 
holders  would  for  one  moment  entertain  a  proposition  to  surrender 
the  whole  income  of  the  road,  and  give  a  prior  lien  to  the  State  of 
Massachusetts  for  $4,000,000.  At  any  rate,  I  don’t  think  such  a 
proposition  is  worth  taking  up  the  time  of  the  Committee  until  it 
is  made  by  the  road,  and  made  legally,  so  it  can  be  acted  upon 
safely7.  I  don’t  believe  there  is  a  man  on  the  Committee,  who  is  a 
lawy7er,  who  will  say  that  that  can  be  done  without  the  consent  of 
the  legislatures  and  courts  of  both  of  the  other  States. 

Now,  this  proposition  to  put  this  stuff  in  the  hands  of  the  Gov¬ 
ernor  and  Council  is  absurd.  Our  own  conviction  about  that  is, 


90 


APPENDIX. 


[Apr. 


that  the  moment  an}T  quantity  of  it  is  put  upon  the  market  for  sale, 
the  price  will  go  down  practically  to  nothing :  that  I  expect. 
That  I  expected  when  I  approved  of  that  proposition.  I  felt,  as 
the  chairman  of  the  Committee  expressed  it,  that  it  was  better  for 
the  State,  better  for  the  road,  that  all  connection  between  the 
State  and  the  road  should  be  ended  ;  and  therefore  we  made  that 
proposition. 

Now,  I  should  be  perfectly  willing  that  the  terms  of  the  recom¬ 
mendation  should  cover  that,  —  that  the  Governor  and  Council 
should  transfer  that  stock,  the  whole  of  it,  to  their  stockholders  or 
bondholders,  or  any  other  parties.  Those  words,  u  amT  other  par¬ 
ties,”  were  put  in  by  my  friend  there,  Mr.  Haynes,  for  the  pur¬ 
pose  of  covering  the  corporation,  giving  the  Governor  and  Council 
authority  to  transfer  this  stock  to  the  corporation.  I  am  perfectly 
willing  to  give  them  all  of  it  to-morrow ;  glad  to  give  it  to  them 
to-morrow.  Let  them  pay  us  $5,000,  take  that  stock,  and  we  will 
quit.  Practically  it  would  come  to  that,  if  we  should  authorize 
the  sale  of  it. 

I  have  not  the  slightest  idea  that  the  State,  or  any  of  the  holders 
of  these  Berdell  bonds,  will  ever  get  one  dollar  from  their  Berdell 
bonds,  whether  they  are  converted  into  stock  or  not,  except  what 
the}’  happen  to  pick  up  out  on  the  street  with  them,  as  the}’’  do 
now.  The  amount  of  new  conversions  has  been  ver}’  small  of 
late.  I  don’t  know  what  sum,  and  don’t  care :  I  imagine  it  is 
very  small.  We  have  put  in  a  large  amount;  and  an}r  large 
amount  of  new  conversions  might  affect  the  price  of  the  bonds  in 
the  market.  The  people  who  are  operating  in  these  bonds  practi¬ 
cally  know  they  are  not  worth  any  thing. 

I  made  a  prett}T  careful  examination,  with  my  friend  from  New- 
burj’port,  of  the  condition  of  the  Hartford,  Providence,  and  Fish- 
kill  Road.  I  have  known  a  good  deal  about  it  for  }Tears.  The 
superintendent  is  an  old  intimate  friend  of  mine,  and  I  keep  posted 
up  pretty  well  about  it ;  have  had  his  reports ;  and  took  some 
interest  in  the  road.  That  road,  as  Mr.  Hajmes  sa}’s,  has  paid 
about  $50,000  since  it  has  been  in  the  hands  of  the  trustees.  Last 
year  it  didn’t  quite  pay  the  interest  on  its  bonds.  We  have  not 
got  the  Report  of  last  year  (1877)  ;  but  that  is  the  fact  in  regard  to 
the  previous  year.  They  continue  to  pay  that,  and  a  little  some¬ 
thing  more.  The  road  is  very  carefully  managed,  very  economi¬ 
cally  managed  ;  and  certainly,  managed  as  that  is,  with  all  its 
resources  nursed  carefully,  and  devoted  entirely  to  the  develop¬ 
ment  of  the  accommodation  of  local  interests,  nothing  else,- — no 
reaching  after  vision ar}’  shadows  in  the  far  distance,  —  that  has 
managed  to  work  itself  up  until  it  has  paid  out  of  its  earnings 


1878.] 


APPENDIX. 


91 


the  interest  on  its  debt.  It  has  not  been  able  yet  to  remove  its 
floating  debt.  It  is  in  veiy  good  condition  now,  and  has  been 
improving ;  so  that  the  superintendent  told  me,  that,  unless  the 
traffic  should  largely  increase,  the  present  equipment  and  condi¬ 
tion  of  the  road  is  such,  that  their  expenses  will  be  materially  less 
hereafter,  and  the  income  will  be  over  and  above  enough  to  pay 
the  interest  on  the  debt.  As  to  the  road  being  worth  $3,000,000, 
anybody  can  guess  ;  but  the  capitalists  of  Hartford  know  just 
about  its  condition,  and  are  willing  to  pay  only  a  hundred  and 
seven  to-day  for  its  bonds.  But,  if  they  agreed  with  my  friend 
from  Newburyport,  instead  of  bringing  a  hundred  and  seven,  the}7, 
would  be  worth  a  hundred  and  fifty  to'a  hundred  and  ^eventy-five. 
They  are  worth  a  little  more  than  the  face  of  the  bond :  the  road 
pays  a  little  more  than  the  interest,  with  good  management. 

Whether  that  road,  which  is  managed  now  by  men  living  in  the 
vicinity,  would  be  better  managed  by  the  parties  who  have  man¬ 
aged  the  Boston,  Hartford,  and  Erie,  or  New- York  and  New- 
England  for  the  past  twTo  to  five  years,  with  the  history  of  the  two 
before  us,  you  can  judge  as  well  as  I.  They  pay  their  interest 
right  along  every  year :  this  road  has  not  paid  any  interest.  I 
don’t  believe  the  two  roads  could  be  united,  and  run  as  profitably 
together  as  they  are  run  separately.  I  don’t  believe  any  union 
would  be  advantageous  to  either  one.  Yes,  I  think  it  would  be 
advantageous  to  this  road,  because  I  think  that  property  is  worth 
a  great  deal  more  than  this  property  is.  If  they  could  get  it,  it 
would  be  some  gain  to  this  road. 

There  is  another  thing  that  should  not  be  lost  sight  of,  —  the  ex¬ 
isting  law-suit.  There  is  no  doubt  about  it :  influential  parties  have 
brought  a  suit  denying  the  right  of  this  road  to  redeem  the  Hart¬ 
ford,  Providence,  and  Fishkill  Road.  It  is  easy  enough  for  their 
counsel  to  laugh  them  out  of  sight;  but  that  don’t  settle  them: 
the}7-  have  got  to  come  before  the  court  for  adjudication,  and  they 
will  come  to  trial,  no  doubt.  I  am'no  lawyer,  and  have  not  made 
an  examination  for  some  years  past ;  but,  two  or  three  or  four 
years  ago,  I  examined  the  question  considerably ;  but  we  found 
sufficient  other  ground  for  deciding  the  question  adversely,  and 
therefore  we  made  no  refference  to  it  in  our  Report.  There  are 
such  suits  existing,  and  real  questions  raised  by  parties  who  mean 
to  carry  it  through,  there  is  no  doubt.  What  it  will  come  to  I 
don’t  know.  I  think  we  had  better  not  buy  into  a  law-suit. 

I  will  answer  an}'  question  any  gentleman  desires  to  ask  me. 

Mr.  Tucker.  Do  you  think  on  a  loan  of  $4,000,000  the  inter¬ 
est  would  be  secure  on  this  road  ? 

Mr.  Bird.  Fairly  so. 


92 


APPENDIX. 


[Apr. 


Mr.  Tucker.  Why  should  it,  if  it  has  no  surplus  ? 

Mr.  Bird.  I  said,  “fairly.”  I  don’t  know  :  we  put  it  pretty 
cautiously  in  our  Report.  I  mean  to  say  at  five  per  cent,  what 
the  State  would  pay  out ;  but  the  surplus  to  help  us  pay  up  our 
old  debt,  leaving  out  the  question  of  policy  of  resorting  to  this 
method  of  paying  old  debts  — 

Mr.  Tucker.  If  there  is  no  surplus  from  the  earnings  of  the 
road,  except  what  they  have  to  use  for  their  yearly  necessities,  I 
cannot  see  where  you  get  any  mone}^  to  pay  the  interest  on  a  four- 
million  loan.  That  is  what  I  want  to  find  out.  You  sa}T  in  your 
Report  that  it  is  reasonably  secure. 

Mr.  Bird.  Well,  that  is  $200,000.  The  income  of  the  other 
road  is  $160,000.  I  should  think  likely  the  net  income  on  that 
road  would  be  likelyT  to  be  about  that. 

Mr.  Tucker.  You  rely  upon  that  road  to  pay  the  interest? 

Mr.  Bird.  Oh,  yes,  sir  ! 

Mr.  -» - .  Would  it  help  the  matter  some  to  transfer  that 

management  to  this  end  ? 

Mr.  Bird.  I  think  it  would.  I  am  very  much  prejudiced 
against  these  gentlemen. 

Mr.  Tucker.  Why  do  you  think  those  bonds  would  sell  for 
$150  on  the  hundred  if  the  road  was  worth  three  millions? 

Mr.  Bird.  If  the  road  was  worth  three  millions,  the  bonds 
representing  only  three  millions,  paying  seven  per  cent  on  that : 
seven  per  cent  on  two  millions  of  bonds,  the  income  —  That  would 
be  the  income. 

Mr.  Tucker.  A  man  wrould  not  get  more  than  seven  per  cent 
interest  on  his  bond,  no  matter  how  much  the  propeity  was  worth, 
would  he  ? 

Mr.  Bird.  No  :  that  is  true ;  but  a  seven-per-cent  bond  is 
worth  one  hundred  and  thirty  or  forty. 

Mr.  Tucker.  The  stock  of  the  Cambridge  Horse  Railroad  is  a 
pretty  permanent  investment,  and  stands  at  a  hundred  and  twenty, 
or  thereabouts.  That  pa}Ts  nine  per  cent ;  with  taxes  out,  about 
seven  and  a  quarter ;  and  that  has  stood  at  a  hundred  and  ten. 

Mr.  Bird.  I  made  a  mistake  on  that.  Charge  it  off,  and  dis¬ 
credit  so  much  of  my  statement.  I  was  thinking  rather  of  stock 
than  bonds. 

The  Chairman.  I  think  two  gentlemen  of  the  Committee  have 
stated  that  it  was  apparent  to  them,  on  investigation,  that  the 
road  had  improved  in  its  actual  condition  and  in  its  prospects 
under  the  present  management,  showing  an  increasing  prosperity 
under  the  present  management.  Do  you  subscribe  to  that? 

Mr.  Bird.  That  the  condition  of  the  road  has  improved  in  the 


1878.] 


APPENDIX. 


93 


last  three  or  five  years,  there  is  no  doubt  at  all ;  that  it  will  need 
quite  as  much  expenditure  hereafter  to  keep  it  up,  I  have  also  no 
doubt ;  as  to  prospects  of  increase  of  earnings,  I  can  tell  better 
when  the  next  return  is  made. 

The  Chairman.  You  subscribe  to  the  general  statement,  that 
the  present  management  of  the  road  is  to  be  commended  ? 

Mr.  Bird.  I  haven’t  said  so. 

The  Chairman.  I  ask  }’ou  if  you  do? 

Mr.  Bird.  No,  I  do  not  think  it  is  good  management,  frankly. 
I  subscribe  to  all  that  has  been  said  as  to  the  personal  character 
and  best  purposes  of  those  gentleman  as  shown  in  the  manage¬ 
ment  of  this  road,  and  never  had  any  other  opinion.  That  I  have 
nothing  to  say  about.  I  have  had  no  quarrel  with  them  on  that 
ground. 

But  I  do  think  the  policy  of  the  road  is  very  bad.  That  policy 
is  a  constant  reaching  for  through  business  ;  making  expenditures 
for  through  business,  and  neglecting  the  local  business  of  the  road. 
That  is  the  trouble  to-da}\ 

Mr. - .  Do  you  think  that  las!  }-ear  was  a  fair  average  year 

for  money-making  on  a  road  ? 

Mr.  Bird.  I  don’t  think  it  was. 

Mr. - .  How,  in  your  judgment,  would  it  compare  with  ten 

years  in  the  past  or  future? 

Mr.  Bird.  I  could  not  answer  that  question ;  I  should  want  to 
take  the  railroad-returns  for  the  last  ten  years,  and  it  would  take 
a  good  while  to  do  it.  We  all  know  the  business  of  the  community 
has  been  depressed,  railroads  as  well  as  others.  There  has  been 
a  large  amount  of  business :  the  traffic  on  the  road  has  been  very 
large  the  last  three  or  four  months.  But  the  property  has  de¬ 
creased  about  in  proportion  to  the  increase  in  travel. 

Mr. - .  Year  before  last  this  road  did  a  very  large  busi¬ 

ness,  brought  on  by  the  Centennial  celebration  :  this  }rear  it  had 
none  of  that  business,  and  }’et  it  had  an  increase. 

Mr.  Bird.  The  less  the}’  had,  the  better  off  they  were. 

Mr. - .  It  actualty  brought  them  a  good  deal  of  mone}\ 

Mr.  Bird.  Net,  not  a  dollar. 

The  Chairman.  The  road  has  greatly  improved  within  five 
3Tears,  }'ou  said.  To  what  is  that  due? 

Mr.  Bird.  I  admit  the  management  has  been  better  under  these 
gentlemen.  The  daily  management  has  been  vastly  better  under 
these  gentlemen  than  it  was  under  the  Boston,  Hartford,  and  Erie 
directors,  who  did  not  care  about  an}'  thing  but  swindling  the 
State  out  of  money  to  spend  in  gambling  in  New  York  and  Boston. 
The  management  of  the  road  has  improved,  and  the  income  has 


94 


APPENDIX. 


[Apr- 


improved  ;  and  they  have  improved  the  condition  of  the  road : 
there  is  no  doubt  about  that.  The  question  before  us  is,  What  is 
the  prospect  for  future  earnings  over  and  above  the  past? 

Mr. - .  What  do  you  mean  by  local  business  ?  How  far  out 

does  local  business  go  ? 

Mr.  Bird.  I  mean  business  which  legitimately  belongs  to  the 
road.  I  can’t  define  exactly  what  is  meant  by  local  business.  I 
mean  business  which  legitimately  belongs  to  a  road,  which  is 
reasonably  secured  to  a  road  free  from  competition  with  other 
roads,  in  accommodating  w'hich  they  are  not  required  to  compete 
with  other  roads  at  unremunerative  prices.  Every  road  has  its 
own  business  which  properly  belongs  to  it,  and  cannot  be  taken 
from  it  by  any  Qther  road. 

Mr. - .  You  know  the  history  of  this  road  from  the  begin¬ 

ning.  What  was  the  purpose  of  it? 

Mr.  Bird.  It  was  originally  chartered  as  a  local  road  from 
Blackstone  to  Boston. 

Mr. - .  That  was  originally  the  purpose.  That  was  in  1847. 

The  Chairman.  Have  the  Committee  any  other  questions  to 
ask  Mr.  Bird? 

The  hearing  will  be  suspended  here  for  to-day,  and  an  opportu- 
nhy  for  a  further  hearing  will  be  given. 

Adjourned. 


1878.] 


APPENDIX. 


95 


NEW- YORK  AND  NEW-ENGLAND  RAILROAD  CO. 


President’s  Office,  224  Federal  Street, 
Boston,  Feb.  28,  1878. 

To  the  Joint  Committee  on  Railroads  of  the  Massachusetts  Legislature. 

Mr.  Chairman  and  Gentlemen,  —  At  the  close  of  the 
last  hearing  before  yon  in  relation  to  the  Commonwealth’s 
interest  in  the  New- York  and  New-England  Railroad,  a  sug¬ 
gestion  was  made,  that  the  statements  presented  by  the  offi¬ 
cers  of  the  Road  should  be  handed  to  the  committee  in 
print. 

In  accordance  with  that  suggestion,  I  have  the  honor  to 
submit  herewith  a  stenographic  report  of  the  hearing,  and 
copies  of  the  several  papers  referred  to  therein. 

As  the  proposition  made  by  the  directors  of  the  New-York 
and  New-England  Railroad  Company  to  the  joint  special 
committee  of  1877,  and  renewed  to  your  committee,  is  the 
principal  subject  under  consideration,  and  as  it  was  not  read 
or  stated  at  length  in  the  hearing,  I  have  deemed  it  proper  to 
insert  it  in  the  first  pages  of  this  communication.  I  would 
also  remind  the  committee,  that  the  railroad  company  has 
consented  to  a  modification  of  this  proposition  to  the  extent 
that  the  Commonwealth  shall  retain  the  ownership  of  its 
stock. 

It  was  our  intention  at  the  hearing  on  the  19th,  if  time 
had  permitted,  to  have  made  further  reference  to  some 
portion  of  the  testimony  of  the  majority  of  the  committee  who 
signed  the  report  (House  Document  No.  2)  ;  and  also  to  pre¬ 
sent  some  other  considerations  which  we  think  should  be 
brought  to  the  notice  of  the  committee  and  the  legislature, 
in  order  that  they  may  have  all  the  facts  before  them,  and 


96 


APPENDIX. 


[Apr. 

thus  be  able  to  judge  of  the  policy  of  accepting  the  proposi¬ 
tion  submitted  by  the  railroad  company.  A  brief  statement 
of  these  considerations  is  therefore  annexed. 

A  computation  showing  the  absolute  money  gain  and  sav¬ 
ing  in  taxation  to  the  people  of  the  State  by  the  acceptance 
of  the  proposition  of  the  company,  and  a  table  giving  the 
population  and  valuation  of  the  cities  and  towns  on  the  line 
of  the  New-York  and  New-England  Road,  as  compared  with 
similar  statistics  on  the  line  of  the  Boston  and  Albany  Road, 
both  of  which  were  referred  to  at  the  hearing,  together  with 
a  map,  upon  a  small  scale,  showing  the  location  of  the  road 
and  its  connections,  are  inserted  in  an  appendix. 

Very  respectfully,  your  obedient  servant, 

•  Wm.  T.  Hart, 

President  N.  Y.  and  N.  E.  R.  R.  Co. 


1878.] 


APPENDIX. 


97 


PROPOSITION  OF  THE  RAILROAD  COMPANY. 


NEW-YORK  AND  NEW-ENGLAND  RAILROAD  COMPANY. 


President’s  Office,  224  Federal  Street, 
Boston,  Sept.  J5,  1877. 

To  the  Hons.  Frederick  M.  Stone,  Tilly  Haynes,  Eben  F.  Stone, 

Francis  W.  Bird,  and  Levi  C.  Wade,  Committee  of  the  Massachusetts 

Legislature . 

Gentlemen, — Acting  upon  the  suggestion  made  by  you  at  our 
last  meeting,  and  with  a  view  to  relieve  the  State  from  any  further 
payments  in  consequence  of  its  loan  to  the  Boston,  Hartford,  and 
Erie  Railroad  Compan}r,  I  have  the  honor  to  submit  herewith,  on 
behalf  of  the  New-York  and  New-England  Railroad  Company,  the 
successor  of  the  B.,  H.  and  E.  R.  R.  Co.,  a  proposition  which  we 
have  thought  veiy  liberal  towards  the  State,  and  yet  a  perfectly 
reasonable  and  proper  one  for  us  to  make,  keeping  in  view  the 
rights  of  all  other  parties  similarly  situated. 

We  trust  it  will  receive  your  approval  as  representing  the  in 
terests  of  the  Commonwealth  in  the  property  of  this  company. 

In  1870  the  Commonwealth  of  Massachusetts  issued  its  scrip  to 
the  amount  of  $3,600,000  to  aid  in  the  completion  of  the  railroad 
of  the  Boston,  Hartford,  and  Erie  Railroad  Company,  and  received 
in  exchange  bonds  to  an  equal  amount,  issued  by  said  corporation. 
These  bonds  were  secured  by  mortgage,  and  were  part  of  an 
authorized  issue  of  $20,000,000,  the  whole  of  which  were  negoti¬ 
ated. 

The  mortgage  has  since  been  foreclosed,  and  a  new  corporation 
organized  by  the  bondholders,  under  the  name  of  the  New-York 
and  New-England  Railroad  Company,  with  a  capital  stock  equal  to 
and  exchangeable  for  the  principal  of  said  bonded  debt. 

The  Commonwealth,  by  the  conversion  of  its  bonds,  has  become 
the  owner  of  $3,600,000  of  stock  in  the  new  corporation,  upon 
which  no  dividends  have  yet  been  received  ;  and  it  is  compelled  to 


98 


APPENDIX. 


[Apr. 


pay,  as  interest  upon  the  scrip  issued  b}~  it  in  1870,  an  annual 
sum  of  $180,000,  for  which  it  receives  no  equivalent.  The  prin¬ 
cipal  of  this  scrip,  which  becomes  due  Jan.  1,  1900,  will  be  met 
by  a  sinking-fund  available  for  the  purpose. 

The  New-York  and  Ncw-England  Railroad  Company  has  be¬ 
come  the  owner,  by  such  foreclosure,  of  345  miles  of  railroad, 
extending  from  Boston  to  Willimantic,  and  from  Providence,  via 
Willimantic,  Hartford,  and  AVaterbuiy,  to  Fishkill  on  the  Hudson 
River,  and  from  Brookline  to  Woonsocket,  including  several 
branches  of  said  main  roads.  Between  Waterbuiy  and  Fishkill,  a 
distance  of  about  76  miles,  the  road  is  still  unfinished. 

Portions  of  the  property  are  subject  to  various  mortgages  and 
other  liens  to  the  amount  of  about  $4,000,000. 

For  the  purpose  of  completing  the  road,  and  discharging  these 
debts  so  as  to  obtain  an  absolute  title  to  its  property,  free  from  all 
encumbrance,  the  corporation  has  been  authorized,  by  the  concur¬ 
rent  legislation  of  Massachusetts,  Rhode  Island,  Connecticut,  and 
New  York,  to  execute  a  mortgage,  and  issue  bonds  secured  thereby 
to  an  amount  not  exceeding  $10,000,000. 

A  mortgage  has  been  made,  bearing  date  Jan.  1,  1876;  but  it 
has  been  found  impossible  to  negotiate  the  authorized  issue  of 
bonds  at  a  satisfactory  price,  owing  to  the  unprecedented  and 
undiscriminating  distrust  of  all  railroad  investments  which  now 
exists  in  the  community. 

In  the  mean  time,  the  earnings  of  the  road  have  been  expended 
in  the  improvement  of  the  property ;  so  that  it  is  now  estimated 
that  the  sum  of  about  $6,000,000  will  sufficiently  meet  the  pur¬ 
poses  for  which  such  mortgage  loan  was  authorized. 

It  is  for  the  manifest  interest  of  the  corporation  and  its  stock¬ 
holders  to  obtain  this  money  without  sacrificing  its  securities  at 
panic  rates,  and  it  is  for  the  manifest  interest  of  the  Common¬ 
wealth  to  be  relieved  from  the  annual  charge  of  $180,000,  which  it 
is  now  compelled  to  pa}",  and  for  the  reimbursement  of  which  the 
thirty-six  thousand  shares  of  the  capital  stock  of  the  New-York 
and  New-England  Railroad  Compan}",  which  it  now  holds,  affords 
very  insufficient  security.  It  is  believed  that  both  these  ends  can 
be  accomplished  ;  and,  with  a  view  to  this  result,  the  corporation 
respectfully  submit  the  following  proposition  :  — 

First,  That  the  Commonwealth  shall  issue  its  scrip  for  $6,000,- 
000,  pa}’able  Jan.  1,  1905,  with  interest  semi-annually  at  the  rate 
of  five  per  cent  per  annum  ;  and  shall  cause  the  same  to  be  sold 
by  an  agent  of  its  own  selection,  and  the  proceeds  thereof  applied 
by  such  agent,  first,  to  the  purchase  or  discharge  of  all  the  in- 


1878.] 


APPENDIX. 


99 


debtedness  of  the  corporation  or  to  which  any  of  its  property  is 
subject,  and,  second,  to  the  completion  of  the  road  to  the  Hud¬ 
son  River,  and  equipping  the  same  for  use. 

Second ,  That,  in  consideration  thereof,  the  New-York  and  New- 
England  Railroad  Company  shall  enter  into  an  obligation  to  pay 
to  the  treasurer  of  the  Commonwealth  the  principal  of  said  scrip 
when  the  same  shall  mature,  and  the  interest  thereon  as  the  same 
becomes  due ;  and  shall  further  pay  to  said  treasurer,  in  equal 
semi-annual  payments,  on  the  first  days  of  January  and  July  in 
each  year,  until  the  first  of  Januaiy,  1900,  the  sum  of  $180,000 
per  annum ;  and  as  security  for  the  fulfilment  of  such  obligation, 
shall  deposit  with  such  treasurer  bonds  to  be  issued  under  its  au¬ 
thorized  mortgage  to  the  amount  of  $9,000,000.  [And  upon  the 
fulfilment  of  these  stipulations  by  the  New-York  and  New-Eng- 
land  Railroad  Company  the  amount  of  stock  now  held  by  the  State 
shall  become  the  property  of  the  compan}'.]1 

The  effect  of  this  scheme  would  be,  that  the  Commonwealth 
would  risk  the  payment  of  $300,000  per  annum,  and  would  receive 
in  return  an  obligation  to  pa}r  $480,000  per  annum,  secured  by  a 
first  lien  on  all  the  propert}7  of  the  corporation. 

The  effect  to  the  corporation  would  be,  that  it  would  receive  a 
sum  sufficient  to  complete  its  road,  and  free  it  from  debt  for  an 
annual  interest  charge  of  $480,000,  which  is  only  twentj'-four  per 
cent  of  its  present  gross  earnings.  That  these  earnings  will  be 
largely  increased  b}r  the  completion  of  the  road  to  the  Hudson 
River,  and  its  consolidation  under  one  management,  can  hardly  be 
doubted. 

Very  respectfully,  your  obedient  servant, 

Wm.  T.  Hart, 

President  N.Y.  and  N.E .  R.R.  Co. 

1  The  Railroad  Company,  at  a  hearing  before  the  Railroad  Committee,  consented  to  a 
modification  of  this  proposition,  by  striking  out  the  provision  enclosed  in  brackets  in  rela¬ 
tion  to  the  ownership  of  stock. 


100 


APPENDIX. 


[Apr. 


REPORT  OF  HEARING 

ON  THE 

NEW-YORK  AND  NEW-ENGLAND  RAILROAD. 


The  Committee  on  Railroads  of  the  Massachusetts  Legislature 
met  at  ten  o’clock  a.m.,  Tuesday,  Feb.  19,  1878,  and  a  hearing 
was  had,  of  which  the  following  is  a  stenographic  report :  — 

The  Chairman.  The  report  of  the  Special  Committee  on  the 
New-York  and  New-England  Railroad  is  under  consideration  to¬ 
day,  and  the  Committee  are  present  to  hear  from  the  officers  of  the 
road. 

William  T.  Hart  ( President  of  the  New-York  and  New-England 
Railroad  Company) .  Mr.  Chairman,  I  regret  very  much  to  inform 
the  Committee  that  the  counsel  of  the  company,  Mr.  Baldwin,  has 
been  obliged  to  leave  the  city  and  country  on  account  of  ill-health. 
He  sails  from  New  York  to-da}~.  We  appear  here  without  counsel ; 
and  I  do  not  know  whether  it  is  necessary  to  have  any,  the  subject 
being  a  very  simple  one. 

If  the  Committee  have  no  direction  to  give  as  to  the  order  of 
proceeding,  I  would  like  to  have  them  listen  to  a  statement  which 
has  been  prepared  by  our  General  Manager,  who  has  been  familiar 
with  the  road  since  the  Receivers  took  possession  of  the  property. 
He  was  associated  with  them,  and  is  familiar  with  all  matters  con¬ 
nected  with  the  road,  as  much  as,  if  not  more  than,  any  other  per¬ 
son.  He  has  prepared  a  statement  of  the  business  of  the  company, 
including  all  points  which  he  thought  would  be  of  interest  to  the 
Committee.  If  agreeable  to  the  Committee,  he  will  now  make  his 
statement ;  after  which  we  will  proceed,  if  we  have  time,  with  some 
other  matters. 

We  very  fortunately  have  present  two  of  our  New-York  Direct¬ 
ors  ;  and  I  think  the  Committee  may  be  pleased  to  hear  from  them 
in  regard  to  the  business  to  come  from  the  State  of  New  York,  and 
the  feeling  in  New  York  in  reference  to  this  company  b}'  those 
who  own  its  securities  to  a  large  amount,  and  are  interested  in  its 
connections.  We  have  an  opportunity  to  hear  from  them,  and  the 


1878.] 


APPENDIX. 


101 


Committee  can  ask  any  questions  that  are  necessary  to  elicit  in¬ 
formation.  Mr.  Charles  P.  Clark,  our  General  Manager,  will  now 
make  his  statement. 

STATEMENT  OF  THE  GENERAL  MANAGER. 

Mr.  Chairman  and  Gentlemen ,  —  A  judicious  decision  of  the 
question  to  which  we  address  ourselves  to-daj7  depends  upon  the 
consideration  of  a  great  variety  of  facts  ;  and  I  must  ask  }T>u  to 
bear  with  me  while  I  attempt  to  place  these  facts  before  jou  in 
some  order. 

History. 

A  little  more  than  eight  }*ears  ago,  the  Boston,  Hartford,  and 
Erie  Railroad  Company  became  hopelessly  insolvent.  It  had  a 
capital  stock  of  twent3r-five  millions  of  dollars,  a  mortgage  debt 
of  twenty  millions,  an  underlying  mortgage  debt  of  two  millions 
and  a  half,  and  a  floating  debt  of  nearly  nine  millions.  It  stood 
upon  its  own  books  at  about  fifty-five  millions,  including  capital 
stock  and  debt.  Its  treasury  was  completely  drained ;  its  man¬ 
agers  had  lost  the  confidence  of  the  community  ;  the  road  was  earn¬ 
ing  barely  enough  to  keep  its  trains  in  motion  ;  but  it  came  to  the 
Legislature  as  an  applicant  for  further  aid. 

At  that  time  the  Commonwealth  had  no  interest  in  the  property, 
excepting  the  loan  of  its  credit  for  three  million  six  hundred 
thousand  dollars,  for  which  it  was  in  possession  of  an  equal  face 
Aalue  amount  of  “  Berdell  Bonds,”  which  it  had  as  collateral. 
At  that  time  the  debt  underlying  those  bonds  was  substantially 
the  same  as  it  is  to-day.  But  the  best  security  the  Company 
could  give  for  any  further  assistance  was  necessarily  subordi¬ 
nate  to  the  already  existing  debt  of  twenty  millions,  known  as 
the  Berdell  mortgage,  as  well  as  to  the  debt,  then  as  now  un¬ 
derlying,  subject  to  this  twenty-million  debt.  The  application 
was  granted  by  the  Legislature,  after  a  series  of  protracted  hear¬ 
ings,  reported  in  Senate  Document  No.  133  of  1870;  but  the  bill 
failed  to  become  a  law  through  the  action  of  the  Executive. 

The  Supreme  Court  of  the  Commonwealth,  in  the  summer  of 
1870,  some  six  months  after  these  hearings,  at  the  instance  of  a 
New-York  party,  appointed  Receivers,  and  the  road  passed  into  the 
possession  of  its  creditors,  not  only  in  Massachusetts,  but  by  the 
force  of  similar  decrees  from  appropriate  tribunals  in  Rhode 
Island,  in  Connecticut,  and  in  New  York. 

As  to  all  that  antedates  this  transfer  I  shall  have  nothing  to 


102 


APPENDIX. 


[Apr. 


say ;  but  with  what  has  transpired  since  the  appointment  of  Receiv¬ 
ers  I  have  been  somewhat  familiar,  and,  in  what  I  may  have  to  say, 
shall  consider  myself  rather  in  the  position  of  a  witness  than  in 
that  of  an  advocate. 

At  the  time  of  this  transfer,  the  road  was  incomplete  as  to  a 
necessary  link  between  Putnam  and  Willimantic.  It  is  true  that 
it  maintained  the  lease  of  the  Norwich  and  Worcester  Railroad, 
and  therefore  controlled  a  line  through  the  Sound  to  New  York ; 
but  it  could  not  directly  reach  Hartford,  New  Haven,  or  New  York, 
by  a  rail  line,  and  it  was  operated  entirely  as  a  local  road.  In¬ 
deed,  the  lease  of  the  Norwich  and  Worcester  would  have  been 
forfeited  but  for  the  advance  by  the  Receivers  of  more  than  one 
hundred  thousand  dollars,  which  was  in  arrears  from  the  Boston, 
Hartford,  and  Erie  Corporation.  The  Receivers  judged  that  the 
completion  of  the  link  between  Willimantic  and  Putnam,  in  the 
State  of  Connecticut,  would  add  very  much  to  the  business  and  to 
the  importance  of  the  road.  Something  like  two  millions  of  dol¬ 
lars  had  been  expended  on  this  twenty-five  miles  ;  and  about  four 
hundred  thousand  dollars  more,  necessary  for  the  completion  of 
this  link,  was  secured  by  the  issue  of  Receivers’  certificates  of 
indebtedness,  which  were  made  by  decrees  of  court  a  first  lien 
upon  it. 

It  was  evident  that  a  foreclosure  of  the  Berdell  mortgage  must 
be  made  in  order  that  a  good  title  to  the  property  might  be  had  ; 
but  the  Receivers  were  authorized  to  continue  in  possession  of  the 
road  until  such  of  the  debts  of  the  old  Company  as  the  court  had 
directed  them  to  pa}’,  including  that  for  the  Norwich  and  Worces¬ 
ter  lease,  as  well  as  those  for  supplies  for  some  months  previous, 
and  such  other  debts  as  they  had  contracted  in  the  discharge  of 
their  duties,  had  been  paid,  while  possession  by  the  Trustees  was  a 
necessary  preliminary  step  to  foreclosure. 

It  was  a  long  and  hard  struggle  to  induce  the  holders  of  the 
Berdell  bonds  to  unite  in  any  effective  action  to  transfer  the  pos¬ 
session  of  the  road  from  the  hands  of  the  Receivers.  The  Corpora¬ 
tion  at  this  time  had  passed  into  the  nominal  control  of  New-York 
parties,  representing  the  stock  of  the  Boston,  Hartford,  and  Erie 
Railroad  Company,  who  met  them  in  every  court  with  the  corpo¬ 
rate  name,  and  disputed  the  bondholders’  rights.  It  was  evident 
that  this  stock  interest  would  be  a  serious  and  continual  trouble 
technically,  and  would  greatly  delay,  if  not  entirely  defeat,  the 
necessary  steps  to  acquire  title  of  the  property  in  the  mortgagees. 
A  committee  of  the  bondholders  was  formed  early  in  the  fall  of 
1870  ;  and  the  State  was  represented  upon  that  committee,  at  first 


1878.] 


APPENDIX. 


108 


informally,  but  subsequently  under  the  provisions  of  chap  4,  Re¬ 
solves  of  1871. 

Counsel  advised  that  the  interference  of  the  bankrupt  corpora¬ 
tion  must  be  prevented.  Upon  the  petition  of  members  of  this 
Bondholders’  Committee  to  the  United-States  Court,  a  warrant  in 
bankruptcy  was  issued  ;  and  thereafter  all  the  rights  of  the  corpo¬ 
ration  were  vested  in  the  assignees  in  bankruptcy  under  the  United- 
States  Bankrupt  Act,  whose  duty  it  was  to  care  for  the  assets  of 
the  Company  not  covered  by  the  mortgage,  and  to  represent  the 
stockholders  of  the  Boston,  Hartford,  and  Erie  Railroad  Company 
in  any  matter  in  court. 

It  is  important  to  note  that  there  have  been  three  parties  inter¬ 
ested  in  the  administration  of  the  affairs  of  the  Boston,  Hartford, 
and  Erie  since  its  failure,  —  the  Receivers,  who  were  in  possession 
from  August,  1870,  to  August,  1871  ;  the  Trustees  under  the  Ber- 
dell  mortgage,  who  operated  the  road  during  the  eighteen  months 
necessary  for  foreclosure  ;  and  the  Assignees  in  Bankruptcy,  who 
have  never  had  possession  of  the  property,  but  who  have  repre¬ 
sented  the  Boston,  Hartford,  and  Erie  Railroad  Company  as  a 
matter  of  law. 

The  Commonwealth’s  Interest. 

Before  the  Commonwealth  could  take  any  effective  action  in 
relation  to  the  railroad,  it  was  necessary  that  the  Boston,  Hartford, 
and  Erie  should  relinquish  its  right  to  redeem  the  bonds  held  by 
the  State  as  collateral.  As  it  was  manifest  that  this  right  was 
only  of  technical  value,  the  assignees  in  bankruptcy,  representing 
that  corporation,  made  a  release  to  the  Commonwealth ;  and  the 
State  thus  became  the  owner  of  these  bonds,  and  was  placed  for 
the  first  time  in  the  same  relation  to  the  property  itself  as  the 
other  bondholders. 

Upon  the  request  of  the  Governor  of  the  Commonwealth  and  of 
other  bondholders,  Mr.  Hart,  Mr.  Olyphant,  and  mj'self,  became 
and  were  confirmed  by  court  in  July,  1871,  as  the  Trustees  under 
the  Berdell  mortgage. 

o  o 

We  naturally  applied  to  those  interested  to  furnish  us  with  the 
money  to  pay  the  Receivers,  and  to  obtain  possession  of  the 
property  for  purposes  of  foreclosure  ;  and  the  State  of  Massachu¬ 
setts,  under  chap.  90  of  the  Resolves  of  1871,  advanced  $72,000 
in  cash,  while  other  bondholders  advanced  about  $100,000  :  which 
was  sufficient  to  pay  the  Receivers’  debt,  excepting  that  repre¬ 
sented  by  their  certificates  of  indebtedness  issued  to  pa}T  for  the 
completion  of  the  road  between  Putuam  and  Willimantic ;  and 


APPENDIX. 


104 


[Apr. 


these  have  since  been  paid,  and  together  form  the  nucleus  of  the 
debt  of  the  present  corporation. 

With  the  subsequent  steps  the  Committee  are  doubtless  familiar. 

The  road  was  operated  by  the  Trustees  until  the  mortgage  was 
foreclosed  ;  a  meeting  of  the  bondholders  was  called,  and  the  New- 
York  and  New-England  Railroad  Company  was  organized,  all  in 
precise  conformity  with  the  terms  of  the  mortgage-deed  to  Ber- 
dell  and  others.  All  the  proceedings  have  since  been  ratified 
and  confirmed  by  the  courts  and  legislatures  of  all  four  of  the 
States. 

The  Commonwealth’s  bonds  were  exchanged  for  stock  in  the 
company,  as  provided  by  the  mortgage,  and  authorized  by  the 
provisions  of  chap.  80,  Resolves  of  1871  ;  and  the  Company  was 
entitled  to  a  conveyance  of  the  property  from  the  Trustees  upon 
settlement  of  their  trust  debt. 

Even  then  it  was  difficult  to  induce  the  owners  of  the  property, 
for  whom  we  had  secured  a  good  title,  to  repay  us  the  money  which 
we  had  been  obliged  to  advance  or  expend  to  foreclose  the  mort¬ 
gage.  We  came  to  the  Commonwealth  again  ;  and  under  the  terms 
of  chap.  73,  Resolves  of  1874,  $250,000  was  advanced  by  the 
State.  We  paid  them  back  the  $72,000  and  interest;  and  on  the 
28th  of  July,  1875,  the  New-York  and  New-England  Railroad 
Company  came  into  possession  of  its  property  under  a  good 
title. 

It  is  in  this  way  that  the  State  is  now  the  holder  of  the  Com¬ 
pany’s  note  for  $250,000  ;  there  having  been  no  author^  granted 
b}^  the  Legislature  to  exchange  the  note  for  the  Company’s  bonds, 
as  has  been  done  by  most  of  the  other  holders.  And  you  will  note 
carefully  that  this  is  the  only  debt  of  an}7  kind  owing  by  the  Com¬ 
pany  to  the  Commonwealth,  and  that  the  interest  upon  this  note 
has  been  regularly  and  promptly  paid  by  the  Company  to  the  State 
Treasurer  at  seven  per  cent  per  annum. 

Debt  of  the  Company. 

I  have  said  that  the  debt  made  first  by  the  old  corporation,  paid 
by  the  Receivers,  transferred  to  the  Trustees,  finally  paid  by  the 
present  (New-York  and  New-England)  Company,  was  the  nucleus 
of  the  present  debt  of  the  Compan}7.  But  it  is  not  the  whole  of 
the  debt  of  the  Compan}7,  and  it  is  proper  now  to  consider  how 
that  debt  came  to  exist. 

The  report  of  the  New-York  and  New-England  Railroad  Com¬ 
pany  and  that  of  the  Railroad  Commissioners  (House  Document 
325,  1877,  p.  4)  shows  that  the  net  debt  of  the  Company  on  the 


1878.] 


105 


APPENDIX. 

30th  of  September,  1876,  was  substantially  $1,000,000,  —  $1,011,- 
201.48  ;  and  the  question  is  a  very  pertinent  one  as  to  the  occa¬ 
sion  for  this  debt,  when  none  of  the  earnings  of  the  road  have 
been  applied  to  the  payment  of  dividends. 

And,  if  this  is  the  legitimate  result  of  the  operation  of  the  road 
for  six  years,  —  say  from  August,  1870,  the  time  at  which  it  went 
into  the  hands  of  the  creditors,  to  September,  1876,  —  it  would 
seem  to  be  a  discouraging  result ;  but  if  gentlemen  will  look  at  p.  4 
of  House  Document  No.  325  of  the  year  1877,  being  the  Report  of 
the  Railroad  Commissioners  on  the  New-York  and  New-Engl’and 
Railroad,  the}’  will  find  a  statement  of  unusual  expenses  attending 
the  foreclosure  of  the  Berdell  mortgage,  payment  of  Receivers 
and  Trustees,  and  Assignees  in  Bankruptcy,  and  construction  ac¬ 
count,  amounting  to  $1,568,056.18.  To  this  amount  should  be 
added  the  payment  on  Norwich  and  Worcester  lease  account, 
shown  on  p.  20  of  the  same  document  (say  $270,741.36,  less  the- 
first  item  of  that  exhibit,  $106,816. 71 ,  which  is  already  included 
in  the  first-mentioned  amount) ,  or' net  $163,924.65.  I  call  this 
an  unusual  expenditure,  as  the  lease  is  now  self-sustaining.  To¬ 
gether  these  show  what  the  Commissioners  call  unusual  expenses 
of  $1,731,980.83,  all  of  wdiich  would  have  been  outstanding  as 
debt  in  1876  but  for  the  application  of  the  net  earnings  of  the 
property  during  the  six  years;  which  net  earnings  reduced  the 
amount  about  $750,000,  leaving  it  but  $1,011,201.48. 

Income  and  Condition  of  Road. 

This  result,  gentlemen,  is  shown  by  the  figures  with  which  you 
are  all  furnished  in  the  reports  of  the  company  of  the  Railroad 
Commissioners  (House  Document  No.  325,  1877),  and  of  the 
Joint  Special  Committee  of  last  year  (House  Document  No.  2, 
1878).  It  is  not  a  brilliant  one,  and  in  many  respects  it  does  not 
fairly  represent  facts.  The  revenue  of  139  miles  of  road  has  been 
forced  to  bear  the  general  expenses  of  a  system  covering  more 
than  400  miles.  It  has  been  made  unfair  by  charging,  against 
operating  expenses,  repairs  which  should  have  been  spread  over  a 
series  of  years  prior  to  the  time  when  the  creditors  came  into  pos¬ 
session.  The  amount  disbursed  in  any  department  has  been  lim¬ 
ited  only  by  the  earnings,  after  paying  the  expenses,  interest,  and 
taxes. 

The  physical  condition  of  the  road  in  1870  wTas  wretched.  Al¬ 
most  every  bridge  required  renewal.  The  power  was  deficient  in 
quantity  and  quality.  Both  cars  and  locomotives  were  unprovided 
with  train-brakes.  There  were  no  Miller  platforms,  nor  any  right 


106 


APPENDIX. 


[Apr. 


to  apply  them.  Not  a  fish-plated  rail  was  in  use  on  the  road. 
The  buildings  and  platforms  were  in  such  condition,  that  the  treas- 
ury  was  drawn  upon  almost  every  week  to  pa}’  for  sprained  ankles 
and  broken  wrists.  The  road  had  little  or  no  business,  excepting 
that  existing  upon  its  own  lines.  But  from  that  day  its  gross  earn¬ 
ings  have  been  steadily  increasing. 

Look  at  the  figures  for  the  year  ending  Sept.  30,  1871  :  — 


The  earnings  were 
For  1872  . 

For  1873  . 

For  1874  . 

For  1875  . 

For  1876  . 

For  1877  . 


$091,851.94 

841,391.74 

857,114.00 

915,290.23 

915,880.13 

1,000,482.26 

1,010,336.84 


These  are  actual  results,  and  show  the  growth  of  the  business 
done  by  the  road.  The  net  is  small,  because  the  improvements 
were  extensive,  and  largely  charged  to  operating  expenses. 


Railroad  Accounts. 

We  have  now  seen  what  the  results  were  up  to  September,  1876  ; 
and  will  take  up  those  of  the  year  ending  September,  1877,  in  re¬ 
gard  to  which  questions  have  been  asked  by  some  members  of  the 
Committee.  Before  analyzing  the  accounts  for  the  last  year,  let  us 
examine  railroad  accounting  in  general,  which  presents  difficulties 
to  many  minds.  Perhaps  it  may  be  better  understood  if  we  take 
some  other  kind  of  business  by  way  of  illustration.  Suppose,  if 
you  please,  the  case  of  Mr.  Jones,  who  owns  a  store  upon  which 
there  is  a  mortgage.  He  has  a  stock  of  goods,  for  which  he  owes 
more  or  less  money.  He  buys  and  sells  goods  during  a  year,  and 
upon  the  first  of  October  he  desires  to  know  how  he  stands.  Now, 
just  what  does  he  want  to  know?  He  may  have  a  purchaser  for 
his  business,  and  desire  to  show  what  that  business  has  yielded ; 
Or  he  may  wish  to  satisfy  himself  as  to  the  value  of  his  entire 
estate. 

If  he  wants  to  know  what  the  value  of  his  business  is,  he  will 
take  an  account  of  his  stock,  of  the  cash  on  hand,  of  the  debts 
due  to  him  considered  good  ;  and  from  the  sum  of  the  stock,  and 
the  cash  on  hand,  and  the  good  debts  due  him,  he  will  deduct  the 
amount  of  his  debts.  He  must  further  modify  the  result  by  taking 
into  account  whether  he  owes  more  or  less  money  for  this  stock  of 
goods  than  he  did  at  the  beginning  of  the  year.  This  is  the  basis 
upon  which  Mr.  Jones  will  make  up  his  accounts,  if  his  object 
is  simply  to  show  Mr.  Brown,  who  is  thinking  of  buying  the 


1878.] 


APPENDIX. 


107 


business,  wh,at  its  value  is,  and  what  the  good  will  of  the  store  is 
worth. 

If,  however,  he  wishes  to  know  what  he  is  worth,  he  will  not  only 
satisfy  himself  as  to  the  net  results  of  his  business  as  in  the  first 
case,  but  he  will  also  take  an  account  of  his  entire  estate.  Sup¬ 
pose  him  to  have  built  an  addition  to  his  store  during  the  year,  the 
cost  of  which  he  paid  out  of  the  proceeds  of  the  sales  of -goods  :  it 
would  have  been  manifestly  unfair  to  deduct  the  cost  of  this  addi¬ 
tion  to  the  real  estate  from  the  profits  of  the  business  when  he 
made  up  his  accounts  to  show  Mr.  Brown,  though  it  may  be  a  very 
important  element  in  deciding  the  value  of  his  own  property.  Al¬ 
though  not  in  cash,  and  not  even  invested  in  the  business,  it  is 
still  an  asset  in  his  estate. 

And  again :  if  during  the  year  he  has  paid  off  the  mortgage 
which  originally  existed  on  his  store  from  the  proceeds  of  his  busi¬ 
ness,  it  would  be  unfair  to  charge  this  mortgage-debt  to  the  store 
in  accounts  for  Mr.  Brown  to  examine,  although  the  payment  of 
this  mortgage  has  made  his  own  estate  worth  so  much  the  more. 
He  has  no  more  money  or  goods  on  hand,  perhaps,  and  owes  as 
much  for  his  stock  as  he  did  at  the  beginning  of  the  year :  but  he 
has  not  only  paid  off  the  mortgage  upon  his  store,  but  possibly  he 
has  also  built  an  addition  to  it;  and  in  both  these  respects  his 
estate  is  the  more  valuable. 

It  may  so  happen  that  he  has  neither  diminished  his  mortgage- 
debt,  nor  has  built  any  addition  to  his  property.  In  this  case,  the 
business  being  equally  profitable,  he  will  find  either  a  larger  stock 
of  goods  on  hand  ready  for  sale,  or  he  will  find  more  good  debts 
due  to  him,  or  more  cash  in  hand.  In  this  latter  case  he  is  no 
better  off  than  he  was  to  have  paid  the  mortgage  upon  his  store, 
or  to  have  built  the  addition  to  it,  provided  the  addition  is  worth 
the  cost  when  lie  comes  to  sell  it,  or  is  an  advantage  to  him  in  con¬ 
ducting  the  business  in  it. 

So  in  the  operation  of  this  railroad,  or  of  an}’  other,  as  shown 
by  its  accounts :  the  net  profits  at  the  close  of  the  year  may  not 
be  in  cash,  or  ,may  be  partly  in  cash  and  in  materials  and  supplies 
on  hand  ;  or  they  may  be  in  new  engines  or  new  cais  ;  or  they  may 
have  gone  into  improvements  of  the  road,  or  into  permanent  build¬ 
ings  :  they  are  none  the  less  real ;  and  the  property  is  so  much  the 
more  valuable,  just  as  it  was  in  the  case  of  the  store. 

The  State,  however,  prescribes  a  method  in  which  the  accounts 
of  railroads  are  to  be  kept ;  and  it  orders  that  accounts  shall  show 
not  only  the  condition  of  the  Company  in  the  capacity  of  owner  of 
its  property,  but  also  the  results  derived  from  its  operation.  The 


IQ  8 


appendix; 


[Apr. 


condition  of  the  property  is  shown  under  the  heads,  “Length  of 
Roads  and  Branches, ”  “Permanent  Improvements,’ ’  “Addition 
and  Reduction  of  Property  Account,”  &c.  ;  while  the  results  of 
the  business  are  shown  in  the  columns  in  the  Commissioners’ 
Report,  where  the  general  transportation,  earnings,  and  expenses 
are  compared.  The  plant  of  a  railroad,  including  its  real  estate, 
fixtures,  branches,  and  franchises,  represents  the  store ;  and  any 
mortgage  upon  it  stands  against  the  mortgage  on  the  store,  while 
its  supplies,  material  on  hand  not  used,  unexpended  coal,  &c., 
represent  the  stock  in  the  store. 

-  The  accounts  of  the  Commissioners  show',  not  only  what  the 
plant  ,  itself  has  cost,  but  the}'  show,  by  another  and  entirely  inde¬ 
pendent  series  of  figures,  the  results  of  the  use-  of  the  plant  during 
the  year. 

In  the  remarks  which  have  been  made  in  regard  to  the  six  years 
from  1870  to  1876,  the  result  shown  is  that  of  a  profit  of  about 
$125,000  a  year  over  disbursements  of  every  name  and  nature, 
including  interest  and  taxes  and  betterments  ;  and  these  disburse¬ 
ments  have  included  the  rents  of  property  in  Boston  and  at  other 
points  which  w’ere  not  owned  by  the  Company. 

In  a  fair  statement  of  the  earning  capacity  of  the  road  in  com¬ 
parison  with  other  roads,  it  is  manifestly  unfair  to  deduct  as 
legitimate  operating  expenses  the  disbursements  for  rent  of  ter¬ 
minal  facilities.  It  is  because  the  road  is  incomplete  that  the 
necessity  for  rent  arises.  The  cost  of  every  foot  of  the  property 
occupied  by  the  Company  should  have  been  defrayed  by  the  Boston, 
Hartford,  and  Erie  Railroad  Company,  and  should  have  no  more 
called  for  rent  from  us  than  the  road-bed  or  the  rails. 

But  the  cost  of  these  rents  should  not  be  neglected  in  any  state¬ 
ment  of  the  condition  or  valuation  of  the  property.  It  is  only  in 
comparative  statements  that  the  objection  lies.  Every  other 
road  has  an  expense  to  meet  for  its  terminal  facilities  ;  but  the 
only  difference  is,  that  these  expenses  in  the  case  of  the  other 
roads  are  called  interest  if  the  property  wras  bought  on  credit,  or 
dividends  if  the  cost  was  paid  by  capital  stock. 

Net  Income  in  1877. 

The  Second  Annual  Report,  p.  15,  of  the  Corporation,  states  the 
net  income  over  operating  expenses  for  the  year  ending  Sept.  30, 
1877,  to  be  $250,991.16. 

This  represents  the  result  of  its  net  earnings  for  the  year.  The 
Railroad  Commissioners,  however,  considered  the  rent  of  the 
property  in  Boston,  and  the  taxes,  say  $55,268.77,  and  $11,339.02,' 


1878.] 


APPENDIX. 


10$ 


operating  expenses  ;  and  they  therefore  deducted  the  sum  of  the 
two,  say  $66,607.78,  and  leave  the  net  income  at  $184,383.37,  as 
shown  on  p.  184  of  the  Railroad  Commissioners’  Report  for  1877, 
and  as  referred  to  on  p.  12  of  the  Report  of  the  Joint  Special 
Committee. 

Admit  that  this  is  the  net  income  of  the  property ;  and  the 
question  is  asked,  What  has  become  of  it?  Let  us  answer  frankly. 
Column  33,  p.  209,  of  the  Railroad  Commissioners’  return,  will 
show  an  expenditure  during  the  year,  for  construction,  of  $33,718.- 
76.  This  was  the  cost  of  double  track,  and  of  the  improvements 
at  Franklin. 

Column  39  shows  an  expenditure  of  $8,600.05,  being  for  new 
equipment.  These  were  passenger-cars  necessaiy  for  the  opera¬ 
tion  of  the  road,  and  are  in  daily  use  upon  its  trains. 

Column  40  shows  an  expenditure  of  $28,881.23  for  the  pur¬ 
chase  of  encumbrances  upon  the  propert}\  These  represent  addi¬ 
tions  to  the  propert}’  account.  The}’  are  like  the  addition  to  the 
store,  and  the  reduction  of  the  mortgage  upon  it. 

The  floating  debt  of  the  Company  was  reduced  during  the  yeatf 
to  the  amount  of  $10,571.56,  as  will  be  shown  by  a  comparison  of 
the  balance-sheets  Sept.  30,  1876,  and  Sept.  30,  1877.  This  is 
like  the  pa}Tment  of  the  debt  on  the  stock  in  the  store. 

There  was  paid  as  interest  upon  the  debt  of  the  Company  $68,- 
486.16  ;  for  discount  upon  the  bonds  sold  during  the  year,  $12,000. 
Sundry  items  were  charged  to  profit  and  loss,  as  accounts  of  no 
value,  $33,375.61.  There  were  bad  debts  which  had  been  made 
and  charged  off. 

Together,  these  make  the  amount  $195,633.37,  which  is  in  ex¬ 
cess  of  the  amount  for  which  we  are  accounting.  The  difference 
may  be  found  in  column  42,  on  p.  212,  of  the  Railroad  Commis¬ 
sioners’  Report,  $11,250,  —  an  amount  which  stood  on  our  books  as 
an  underlying  lien,  but  was  paid  b}'  funds  derived  from  litigation, 
inaugurated  and  brought  to  a  successful  issue  by  the  Receivers  ;  a 
debt  which  our  imaginary  Mr.  Jones  thought  he  would  have  to  pa}r, 
but  which  he  was  relieved  from  paj’ing. 

It  will  thus  be  seen  that  the  $184,000  is  accounted  for  in  put¬ 
ting  an  addition  on  the  store,  which  cost  about  $34,000 ;  in 
increasing  our  stock  of  goods  to  the  extent  of  about  $9,000  ;  in 
paying  off  the  mortgage-debt  to  the  extent  of  about  $28,000,  and 
the  floating  debt  to  the  amount  of  about  $10,000-;  by  defraying 
interest  charges  to  the  amount  of  about  $68,000  ;  and  by  charging 
off  the  balances  of  bad  debts  to  the  amount  of  about  $33,000. 
And  every  dollar  and  every  cent  of  the  net  income  is  accounted 


APPENDIX. 


[Apr. 


110 

for.  It  was  not  in  cash  on  the  30th  of  September  ;  because  all  not 
needed  to  pay  interest  had  been  expended  to  improve  the  property, 
or  to  reduce  its  debts. 

So  much  in  regard  to  accounts. 

Policy  of  the  Management. 

And  now  in  regard  to  the  policy  in  the  operation  of  the  road. 
One  gentleman  who  has  testified  before  you  stated  that  he  thinks 
the  policy  of  the  management  is  very  bad,  and  defines  it  as  a  con¬ 
stant  reaching  after  through  business,  and  neglecting  the  local 
business  of  the  road,  and  says  that  that  is  the  trouble. 

Now,  Mr.  Chairman,  when  the  road  came  into  the  possession  of 
the  creditors  in  1870,  its  earnings  were  very  small.  For  the  ten 
months  ending  Sept.  30  of  that  year,  the}’  were  but  $470,732.39. 
It  had  no  Western  connections,  and  it  did  all  the  business  that 
was  offered  it ;  and  a  slow  increase  of  the  earnings  was  all  that 
could  have  been  expected,  if  the  business  was  confined  to  the  same 
sources.  The  panic  of  1873,  and  the  depression  which  has  pre¬ 
vailed  ever  since,  would,  however,  have  interfered  with  this  reason¬ 
able  expectation. 

The  great  drawback  upon  the  prosperity  of  the  manufacturing 
community  in  New  England  through  which  this  road  runs  arose 
from  the  fact  that  it  was  unable  to  afford  facilities  upon  its  line 
which  could,  to  an}’  extent,  compare  with  those  offered  by  other 
communities  situated  along  the  lines  of  other  roads. 

Freight  Business. 

It  may  not  be  entirely  out  of  place,  Mr.  Chairman,  to  call  your 
attention  to  the  principles  upon  which  the  earnings  on  fourth-class 
traffic  is  apportioned  among  the  roads.  The  bulk  of  raw  materials 
and  food  moved  by  the  great  trunk  lines  from  the  West  and  South- 
West  to  the  East  is  included  in  this  class.  All  through  tariffs  are 
based  upon  the  rate  between  Chicago  and  New  York  for  the  time 
being  ;  and  tariffs  from  other  points  in  either  direction,  including 
those  to  points  in  New  England,  are  made  by  additions  or  subtrac¬ 
tions  of  this  standard  rate. 

Sometimes  we  have  had  the  same  rate  to  Boston  that  has  pre¬ 
vailed  to  New  York,  and  at  times  the  charge  has  been  higher. 
Differences  have  also  prevailed  upon  the  same  kind  of  merchan¬ 
dise,  depending  upon  whether  intended  for  shipment  or  for  con¬ 
sumption.  These  differences,  however,  need  not  be  taken  account 
of  here.  The  general  rule  is,  that,  upon  all  freight  coming  into 
New  England,  a  division  of  the  through  rate  is  made  at  Albany 


1878.] 


APPENDIX. 


Ill 


and  the  part  to  be  earned  by  the  roads  east  of  that  point  has  been 
fixed  by  a  percentage  representing  the  actual  distance  between 
Albany  and  Boston,  compared  with  that  between  Chicago  and 
Boston.  This  percentage  is  a  fraction  less  than  one-fifth  of  the 
through  rate,  and  is  commonly  known  as  the  New-England  divis¬ 
ion.  The  charge  upon  a  carload  of  freight  is  the  same  after  it 
passes  Albany,  east  bound,  whether  it  comes  through  to  Boston, 
or  is  left  upon  the  line  of  the  Boston  and  Alban}’  Road,  whether  at 
Pittsfield,  Springfield,  Worcester,  Framingham,  or  Natick.  The 
charge  also  is  the  same  if  it  passes  on  to  other  roads  which  are 
associated  with  the  Boston  and  Albany  Road  in  the  through  lines, 
cither  destined  for  their  local  points,  or  to  their  termini. 

In  our  case  it  was  impracticable,  from  our  geographical  situation, 
to  associate  our  road  in  these  Boston  and  Albany  lines.  We  could 
not  have  sustained  our  road  upon  the  amount  coming  to  us  as  our 
share  in  the  New-England  division ;  and  there  was  no  possibility 
of  compensating  us  for  this  loss  by  securing  additional  business, 
our  road  reaching  points  which  were  served  by  roads  already  in 
the  association.  The  charge,  therefore,  to  every  man  on  our  road 
receiving  a  carload  of  breadstuff' from  the  West,  was  higher  than 
that  paid  by  his  neighbor  on  the  Boston  and  Albany  by  the  amount 
we  charged  for  hauling  that  carload  from  Boston  or  from  Worces¬ 
ter  to  its  destination  on  our  road.  Our  customers  paid  a  local 
tariff  upon  grain,  cotton,  or  flour,  which,  for  the  service  rendered, 
yielded  us  an  adequate  return  ;  but  the  cost  to  him  was  greater  by 
our  charge  than  the  cost  to  his  neighbor  in  Springfield,  Brookfield, 
Worcester,  or  Natick. 

The  question  of  policy  arose  at  once  as  to  what  practicable 
relief  we  could  afford.  No  one  could  be  expected  to  locate  on 
our  road,  or,  if  located,  could  compete  with  those  supplied  at  lower 
cost  with  raw  material,  or  with  food  for  operatives,  upon  these  other 
lines.  We  were  obliged  to  do  this,  because  the  road  was  incom¬ 
plete,  and  unable  to  establish  its  line  to  and  across  the  Hudson 
River,  by  which  our  customers  could  be  supplied  direct  from  the 
West.  We  must  continue  either  to  operate  the  road  as  a  strictly 
local  road,  under  these  disadvantages  to  the  local  communities,  or 
we  must  find  at  once  some  Western  connection. 

We  could  not  sacrifice  our  earnings  by  supplying  these  local 
wants,  and  hauling  this  freight  free  from  Boston  or  from  Worces¬ 
ter, —  the  points  at  which  we  connected  with  through  Western 
lines,  —  as  we  were  dependent  upon  the  earnings  from  this  class  of 
traffic  to  keep  our  road  in  order  and  in  operation.  The  establish¬ 
ment  of  a  new  through  line  ourselves  would  indeed  oblige  us  to 


112 


APPENDIX. 


[Apr. 


take  as  our  share  of  freight-money  on  raw  material  or  breadstuff's 
for  consumption  at  these  local  points  less  than  we  could  secure  by 
continuing  to  haul  it  from  Boston  or  Worcester.  But  the  estab¬ 
lishment  of  such  a  line  has  created  for  us  a  new  business  to  these 
competing  points,  and  at  a  price  which  enables  us  to  earn  money 
in  place  of  that  previously  charged  on  the  freight  destined  to 
strictly  local  points  :  and  this  has  justified  us  in  benefiting  those 
local  points  by  the  reduced  cost  of  their  freight,  because,  b}r  the 
arrangement  for  a  through  line,  we  are  able  to  bring  a  carload  of 
corn  or  of  flour  from  Chicago  to  Franklin  as  cheaply  as  it  was 
brought  from  Chicago  to  Boston,  and  less  than  it  had  previously 
cost  the  consumer  at  Franklin  by  the  amount  we  had  hitherto  ex¬ 
acted  for  its  transportation  from  Boston  out  to  him  at  Franklin ; 
and  thus  the  consumer  at  Franklin  has  been  put  on  an  equality 
with  the  consumer  in  Framingham,  whose  good  fortune  it  was  to 
live  upon  a  line  doing  a  Western  business. 

So  it  is,  that  our  desire  to  develop  the  local  resources  of  our 
road  (which  we  understand  are  at  the  foundation  of  permanent 
prosperity)  in  the  only  way  it  wras  possible  to  do  it  has  been  criti¬ 
cised  by  one  of  the  Joint  Special  Committee,  who  charges  against 
us  that  we  have  been  neglecting  our  local,  and  reaching  out  for 
through  business.  Nothing  so  clearly  demonstrates  ignorance. 

But  there  is  also  another  element  that  bears  upon  this  subject  in 
charges  of  this  sort.  You  are  all  aware,  that  in  the  operation  of 
a  railroad,  whether  the  business  be  light  or  heavy,  there  are  certain 
fixed  expenses  that  must  be  met,  and  that  these  expenses  do  not 
increase  materially  with  the  amount  of  the  business :  the  organ¬ 
ized  force  for  the  supervision  of  the  track ;  the  construction  and 
repairs  of  bridges,  which  deteriorate  more  by^  time  than  by  use ; 
the  insurance,  and  the  fences;  the  taxes,  gatemen,  and  flagmen; 
the  administration  expenses, —  are  not  materially  affected  by  the 
volume  of  business  ;  and  it  is  necessaiy,  as  an  element  of  being 
able  to  do  business  cheap,  to  do  it  in  large  volume. 

And  so  3'ou  must  remember,  that,  because  we  are  enabled  by 
our  through  lines  to  secure  and  send  ten  carloads  of  flour  from 
Willimantic  to  Boston  on  its  way  from  Chicago  at  a  low  price,  our 
local  consumer  is  doubly  benefited  :  first,  by  receiving  his  own.  car¬ 
load  of  flour  at  a  less  price  than  our  road  could  otherwise  have 
delivered  it  to  him  ;  and,  secondty,  that  the  necessity  for  charging 
a  high  local  tariff*  to  meet  these  fixed  expenses  was  diminished  by 
reason  of  the  net  earnings  on  new  through  business. 


1878.] 


APPENDIX. 


113 


Passenger  Business. 

In  passenger  business  the  same  rule  applies.  I  put  it  to  either 
one  of  you,  whether,  if  you  had  occasion  to  locate  for  business  or 
for  residence,  you  would  select  a  road  or  a  station  which  was 
served  by  numerous  trains,  enabling  you  to  go,  or  your  friends  to 
come,  at  almost  any  hour,  with  through  connections,  so  you  could 
reach  the  great  commercial  centres  ;  or  whether  you  would  immure 
yourself  upon  a  road  running  but  two  or  three  local  trains  a  day. 

If  the  charge  is  made  that  we  have  erred  in  the  other  directions, 
that  we  have  not  furnished  sufficient  facilities,  I  beg  you  to  turn 
to  the  reports  for  the  present  year,  to  be  found  in  the  Massachu¬ 
setts  Railroad  Commissioners’  Return,  pp.  244  and  245,  by  which 
you  will  find  that  the  average  total  passenger  earnings  per  train 
mile,  on  the  eight  roads  leading  out  of  Boston,  have  been  one 
dollar  and  forty-three  cents  ;  varying  from  one  dollar  and  ninety- 
one  cents  on  the  Boston  and  Albany  Road,  the  largest,  to  ninety- 
seven  and  one-half  cents  upon  our  road,  which  is  the  smallest. 

The  expenses  per  train  mile  of  the  same  eight  roads  have  aver¬ 
aged  ninety-two  and  two-hundredths  cents.  Our  expenses  being 
ninet3T-four  and  eight-hundredths  cents,  }T>u  see  that  it  is  not  that 
our  expenses  per  train  mile  have  been  disproportionately  large, 
but  that  our ’revenue  per  train  mile  has  been  too  small. 

Now  a  wrord  as  to  passenger  rates.  It  is  difficult  to  analyze 
the  comparative  profits  of  different  descriptions  of  passenger  busi¬ 
ness,  which  may  be  divided  into  commutation,  local,  and  strictly 
through  business,  although  more  or  less  done  upon  the  same 
trains. 

By  reference  to  p.  250  of  the  Railroad  Commissioners’  Re¬ 
port,  it  will  be  seen  that  our  average  rate  for  season-ticket  pas 
sengers  is  lower  than  that  of  any  road  running  out. of  Boston,  with 
but  a  single  exception, — the  Old  Colony;  and  it  is  as  low  as  we 
can  afford  to  run  the  trains  with  the  present  amount  of  business. 

The  same  page  discloses  the  fact,  that  our  average  rate  on  local 
passengers  is  less  than  the  average  of  the  whole  eight  roads  run¬ 
ning  out  of  Boston  ;  while  our  average  earnings  from  through  pas¬ 
sengers  are  more  than  ten  per  cent  above  the  average  of  the  same 
roads.  In  business  to  New  Haven  and  beyond,  we  have  in  through 
business  the  advantage  of  twent3r-three  miles  shorter  distance, 
which,  with  through  rates  fixed  b3r  other  lines,  gives  us  a  larger  rate 
per  mile  than  ai^  other  line  ;/  and  this  advantage  is  permanent. 

These  figures  demonstrate,  that,  in  passenger  rates  at  least,  we 
have  not  discriminated  against  our  local  traffic.  If  }rou  ask  us  to 


114 


APPENDIX. 


[Apr. 


run  more  passenger  trains,  it  will  appear  that  the  profit  upon  those 
we  have  already  run  is  shown  by  the  Commissioners  as  something 
less  than  three  cents  a  train  mile. 

If  it  shall  be  said  that  this  close  result  grows  out  of  our  trains 
run  for  business  beyond  our  road,  turn  to  page  234  of  the  same 
report,  where  3*ou  will  find,  that,  of  our  total  passenger  mileage, 
substantially  one-half  is  joint  business  with  other  roads,  while  the 
new  through  trains  constitute  but  one-fifth  of  the  passenger- train 
mileage.  This,  however,  is  but  an  indication,  as  the  through 
trains  do  more  or  less  local  business,  and  the  local  trains  do  more 
or  less  business  with  connecting  roads. 

Comparison  with  Other  Roads. 

Let  us  examine  still  further  the  question  of  expenses.  You  no¬ 
ticed,  perhaps,  that  our  cost  per  train  mile  is  two  and  six- tenths 
cents  above  the  average.  Let  us  see  what  items  constitute  train 
mileage  expenses. 

On  p.  248,  the  average  cost  of  repairs  of  roads  is  stated  to  be 
ten  cents  a  train  mile :  you  will  find  upon  the  New-York  and  New- 
England  road  it  is  fifteen  cents.  This  means  a  constant  expendi¬ 
ture  for  improvement  of  the  road-bed. 

You  will  find  that  the  average  cost  of  repairs  to  bridges  is  one 
and  three-quarters  cents :  on  the  New-York  and  New-England 
the  expense  is  two  and  a  quarter  cents.  This  means  constant  im¬ 
provement  in  bridges,  including  the  cost  of  eleven  new  ones  last 
year,  all  charged  to  operating  expenses. 

You  will  find  that  the  average  cost  of  new  rails  on  the  eight 
roads  referred  to  is  four  and  one-half  cents  per  train  mile  ;  and  you 
will  find,  on  the  New-York  and  New-England  Road,  the  expense  is 
nine  and  one-half  cents  per  train  mile  for  new  rails.  This  means 
fourteen  miles  of  new  steel  rails,  and  eight  miles  of  new  iron  rails, 
charged  to  operating  expenses  for  new  rails. 

Take,  now,  another  class  of  expenditures  which  also  goes  in  to 
make  the  train-mileage  expenses.  On  repairs  of  locomotives  you 
will  find  our  expense  to  be  substantially  the  average  of  the  eight 
roads.  In  fuel  you  will  find  it  to  be  twenty  per  cent  less.  In  oil  and 
waste  you  will  find  it  about  thirty  per  cent  less. 

So  that,  of  those  elements  which  go  to  make  up  train-mile  ex¬ 
penses,  you  will  find  our  disbursements  for  the  improvements  of 
the  property  average  larger,  while  those  which  show  a  careful  ad¬ 
ministration  in  the  expenditure  of  material  are  smaller,  than  the 
average  of  the  eight  roads  out  of  Boston. 

The  lesson  of  the  whole  is,  that  what  we  lack  is  business ;  that, 


1878.] 


APPENDIX. 


115 


to  attract  business,  we  must  afford  facilities  ;  that  facilities  are  at 
the  foundation  of  local  prosperity  ;  and  that,  in  our  endeavor  to  as¬ 
sist  the  prosperity  of  the  community  served  by  our  property,  we 
have  afforded  a  passenger-train  service  at  rates  which  have  yielded 
but  a  trifle  more  that  it  has  cost. 

Up  to  this  point  we  have  dealt  only  with  the  road  in  the  posses¬ 
sion  of  the  corporation,  comprising  one  hundred  and  thirty-nine 
miles  between  Brookline  and  Woonsocket,  Boston  and  Williman- 
tic,  and  East  Thompson  and  Southbridge. 

Hartford,  Providence,  and  Fishkill  Road. 

We  come  now  to  consider  that  other  portion  of  the  road  known 
as  the  Hartford,  Providence,  and  Fishkill  Railroad,  which  is  com¬ 
pleted  from  Providence  in  Rhode  Island  to  Waterbury  in  Con¬ 
necticut  ;  say,  one  hundred  and  twenty-two  miles.  This  road  is 
owned  by  the  New- York  and  New-England  Railroad  Company, 
having  been  covered  by  the  Berdell  mortgage,  but  when  bought 
by  the  Boston,  Hartford,  and  Erie  Railroad  Company,  in  1863,  was 
in  the  possession  of  the  trustees  under  its  own  mortgagees,  who 
have  jealously  maintained  the  possession  of  it  ever  since. 

It  was  one  of  the  great  mistakes  of  the  management  of  the  Bos¬ 
ton,  Hartford,  and  Erie,  that,  when  they  had  at  one  time  nearty  four 
millions  of  dollars  in  the  bank,  they  did  not  hasten  to  pajr  off  this 
mortgage  of  two  millions,  and  relieve  the  trustees  from  further  re¬ 
sponsibility  in  connection  with  that  road.  But  the  mistake  was 
made  ;  and  all  efforts  either  to  arrange  for  joint  business  upon  sat- 
isfactoiy  terms  of  lease  or  contract,  that  the  roads  might  be  operated 
for  a  common  end,  have,  up  to  this  time,  been  unsuccessful ;  and 
the  two  continue  to  be  operated  by  separate  and  entirely  independ¬ 
ent  managements. 

The  cost  of  that  road,  when  originally  constructed,  was  between 
four  and  five  millions  of  dollars,  two  millions  of  which  was  de¬ 
frayed  from  the  capital  stock,  two  millions  by  the  mortgage-debt, 
and  the  balance  by  a  floating  debt,  which  was  long  since  paid  by 
and  assigned  to  the  Boston,  Hartford,  and  Erie  Railroad  Company. 

Of  the  capital  stock  of  that  company  we  hold  more  than  three- 
quarters  ;  and  our  threefold  title  to  the  road  is  made  by  a  contract 
to  operate  it  for  nine  hundred  and  ninety-nine  years,  a  lease  of  it 
for  the  same  period  for  a  nominal  consideration,  and  by  an  abso¬ 
lute  deed  of  it  to  the  Boston,  Hartford,  and  Erie  Railroad  Com- 
pan}T,  through  whose  mortgage  to  Berdell  and  others  the  New-York 
and  New-England  Railroad  Company  derives  its  title  to  the  whole 
of  the  property  it  possesses. 


116 


APPENDIX. 


[Apr. 


The  object  of  these  three  instruments  was  to  make  an  unques¬ 
tionable  title  for  all  time.  They  were  critically  examined  by  a 
commission  appointed  by  the  Governor  at  the  time  the  State  made 
its  original  advance  to  the  Boston,  Hartford,  and  Erie ;  and  they 
were  pronounced  by  Ex-Chief  Justice  George  Tyler  Bigelow  and 
Ex-Governor  Emory  Washburn  to  be  be}Tond  question.  We  may 
therefore  safely  dismiss  any  doubts  as  to  our  title. 

As  the  Hartford,  Providence,  and  Fishkill  Road  runs  through  a 
territory  free  from  competition,  its  net  results  should  be  greater 
with  the  same  gross  earnings  than  those  shown  by  this  Company ; 
and  it  is  a  matter  of  history,  that,  with  a  fixed  annual  charge  of 
one  hundred  and  forty-three  thousand  eight  hundred  and  fifty-five 
dollars  (being  the  interest  at  seven  per  cent  on  its  mortgage- 
debt)  ,  it  must  have  devoted  its  surplus  revenue  to  purposes  of  its 
own ;  for  the  fixed  annual  interest  charge  was.  met  as  regularly 
and  promptly  by  its  Trustees  when  its  gross  earnings  were  only 
three  hundred  and  fifty  thousand  dollars  as  they  have  been  since 
its  earnings  have  reached  a  million  of  dollars  a  year. 

No  reduction  of  the  principal  of  its  debt  has  ever  been  made  by 
these  Trustees,  excepting  as  the  result  of  an  arrangement  by  which 
the  Rhode-Island  portion  was  leased  to  the  management  of  the 
Connecticut  portion,  a  }7ear  or  two  since,  at  a  sum  exceeding  the 
interest  upon  the  Rhode-Island  debt ;  and  to  that  extent  we  have 
been  benefited.  The  mortgages  in  the  two  States  are  independent 
of  each  other,  and  amount  to  five  hundred  thousand  dollars  in 
Rhode  Island,  and  fifteen  hundred  thousand  dollars  in  Con¬ 
necticut. 

In  House  Document  No.  325  of  1877,  p.  8,  the  Railroad  Com¬ 
missioners  say,  in  reference  to  this  Hartford,  Providence,  and 
Fishkill  Railroad,  — 

“  Based  upon  its  earnings,  the  property  would  now  seem  to  he  worth  in 
the  neighborhood  of  $2, 000, 000  over  and  above  its  indebtedness.  The  road  is 
operated  independently  of  the  New-York  and  New-En gland  Railroad,  and  in 
connection  with  other  and  competing  companies.  As  a  contributing  addi¬ 
tion  to  the  present  road,  its  direct  value  as  increasing  the  earning  capacity 
of  the  latter  would  be  very  considerable.” 

By  reference  to  the  report  made  by  the  Connecticut  Trustees 
under  oath  to  the  Railroad  Commissioners  of  Connecticut,  it  ap¬ 
pears,  that,  for  the  }Tear  ending  Sept.  30,  1877,  the  net  earnings 
of  the  whole  road  were  $215,938.85.  It  is  not  likely  that  the 
amount  available  for  any  purposes  wrould  be  diminished  if  the 
road  were  operated  in  connection  with  this  property. 


1878.] 


APPENDIX. 


117 


These  figures  are  one  year  later  than  those  alluded  to  in  the 
report  of  the  Joint  Special  Committee,  House  Document  No.  2, 
of  1878. 

We  have  now  seen,  that,  upon  the  road  operated  by  this  com¬ 
pany,  the  net  earnings,  after  paying  the  rents  of  terminal  property 
in  Boston  and  all  taxes,  wrere,  last  }’ear,  $184,383.37 ;  that  the 
net  earnings  of  the  Hartford,  Providence,  and  Fishkill  Road,  for 
the  same  time,  were  $215,938.85,  —  or  together,  $400,322.22, — 
applicable  to  the  payment  of  interest  on  any  new  loan ;  and  this 
as  the  result  of  properties  worked  separately  and  competitively. 

The  Joint  Special  Committee,  however  (House  Document 
No.  2,  1878),  fell  into  a  serious  error  by  again  deducting  this  rent 
($55,000)  from  the  net  earnings,  as  it  had  once  been  deducted  to 
reduce  the  net  earnings  for  the  year  to  $184,383.37. 

West  of  Waterbury. 

From  Waterbury  westward  there  exists  an  unfinished  road-bed, 
miles  and  miles  of  which  are  ready  for  the  rails.  Upon  its  con¬ 
struction  three  and  a  quarter  millions  of  dollars  in  actual  cash 
has  been  expended  by  the  contractor  ;  and  three  hundred  thousand 
dollars  more  has  been  paid  by  the  Boston,  Hartford,  and  Erie 
Railroad  Company  for  land  damages  and  real  estate.  So  far 
from  being  a  source  of  revenue  to  the  property,  the  taxes  and 
assessments  upon  it  have  been  paid  out  of  the  earnings  of  the 
road  operated  by  the  New-York  and  New-England  Railroad  Com¬ 
pany  ;  and  its  value,  whatever  it  may  be,  present  or  prospective, 
is  included  in  our  new  mortgage. 

What  it  is  worth,  or  what  it  will  ever  be  worth,  depends  entirely 
upon  what  course  may  be  taken  in  regard  to  it.  I  leave  the  con¬ 
sideration  of  that  branch  of  the  subject  to  others. 

Excuse  me  for  having  delayed  you  so  long.  I  have  given  }Tou 
the  facts  in  regard  to  the  property  ;  and,  if  agreeable  to  you,  I 
should  like  to  submit  them  to  you,  so  you  may  examine  them,  and 
compare  them  with  the  reports. 

Mr.  Gilbert.  In  print,  Mr.  Clark? 

Mr.  Clark.  Yes,  sir,  if  you  desire  it. 

Mr.  Gilbert.  There  is  ever}*  thing  in  arrangement. 

Mr.  Clark.  I  have  tried  to  show  from  one  point  to  another 
exactly  what  the  result  of  the  operation  of  the  road  has  been. 
Not  one  of  the  present  directors  or  officers  of  the  road  is  in  any 
way  responsible  for  the  condition  of  the  property  when  we  took 
possession.  We  know  it  is  a  much  better  road,  and  capable  of 
earning  a  very  much  larger  amount  of  money,  and  that  it  is  earn- 


118 


APPENDIX. 


[Apr. 


ing  a  much  larger  amount  of  money  than  it  was  when  we  took  it. 
I  have  taken  the  situation  of  the  road  as  it  was  then,  and  I  have 
told  you  exactty  what  we  have  done  with  it.  Now  you  may  do 
what  you  will  with  your  own. 

Mr.  Wilder.  Be  kind  enough  to  explain  just  the  condition  of 
the  Berdell  bonds.  I  don’t  know  whether  you  have.  I  was  not 
in  when  you  began. 

Mr.  Clark.  The  Berdell  bonds  are  so  called  because  the  mort¬ 
gage  was  made  to  Berdell  and  others  as  Trustees.  That  mortgage, 
which  was  for  twenty  million  dollars,  provided  that  in  case  of  a 
failure  of  the  Company,  and  a  consequent  foreclosure,  a  new  Com¬ 
pany  might  be  formed,  having  the  same  capital  as  the  mortgage- 
debt  ;  and  this  new  Company  is  the  New- York  and  New-England ; 
that  thereafter  the  Berdell  bonds  should  cease  to  be  a  lien  upon 
the  property,  and  should  simply  entitle  the  holders  to  ten  shares 
of  stock  in  the  new  Compan\’,  in  exchange  for  each  bond  of  one 
thousand  dollars. 

I  did  not  go  into  that  this  morning,  as  it  antedated  possession 
by  the  creditors.  At  the  time  the  State  aid  was  invoked  in  1869 
and  1870,  protracted  hearings  were  had.  The  Berdell  mortgage 
was  a  lien  on  the  property  for  twenty  millions  of  dollars.  That 
debt,  or  rather  the  securities  representing  that  debt,  are  now  the 
stock  of  the  road.  Any  new  money  put  into  the  road  at  that  time 
would  have  been  subordinate  to  that  mortgage,  and  could  have 
been  secured  only  by  a  second  mortgage ;  but,  if  any  money  is 
put  into  the  road  now,  the  security  will  be  good  if  the  stock,  or 
the  Berdell  bonds,  which  now  simply  represent  the  right  to  have 
stock,  is  worth  a  single  cent.  It  makes  a  difference  of  more  than 
twent}r  millions  of  dollars  in  the  security  that  can  be  offered  by 
this  property  to  any  one  putting  money  into  it. 

I  have  ver3r  decided  views  as  to  what  the  policj7  of  the  owners 
of  the  property  should  be ;  and  I  think  I  shall  be  justified  by  the 
result,  if  the  experiment  be  made.  I  do  not  believe  that  the  prop¬ 
erty  will  start  off  full  armored  and  full  fledged,  and  pay  the  inter¬ 
est  on  forty  millions  of  dollars,  as  men,  who  are  supposed  to  be 
sane,  predicted  in  the  hearing  in  1870.  I  do  not  share  their  en¬ 
thusiasm  to  that  extent.  But  I  am  just  as  sure,  that,  to  get  an}^  re¬ 
turn  to  the  stockholders  for  the  mone}7  thej’  have  alreadj^  put  in,  a 
further  expenditure  should  be  made ;  upon  the  principle  that  a 
block  of  buildings  has  been  erected,  and  should  now  be  roofed  in. 
And  I  am  also  sure  that  the  net  income  of  the  road,  if  finished,  will 
make  the  present  stock  a  dividend-paying  securit}7.  If  30U  ask  me 
whether  it  will  pa}^  four  or  five,  or  six  or  seven,  or  ten  per  cent, 


1878.] 


APPENDIX. 


119 


nobody  can  tell ;  and  I  will  not  shake  my  head  and  appear  wise, 
and  state  that  it  will  pay  six,  or  six  and  a  half,  or  seven  per  cent. 

The  Chairman.  You  mean  finished  from  Waterbury  west? 

Mr.  Clark.  Yes,  sir.  The  first  great  problem  is  to  take  these 
halves  of  the  road  (the  Hartford,  Providence,  and  Fishkill,  and  our 
own) ,  and  set  them  to  work  earning  money  together,  and  working 
harmoniously,  and  for  one  common  end :  the  second  is  to  finish 
the  road  west  of  Waterbury. 

Mr.  Chapin.  To  do  that,  I  understand  it  is  necessary  to  take 
up  the  mortgage  on  the  Hartford,  Providence,  and  Fishkill  ? 

Mr.  Clark.  Yes,  sir.  That  is  more  than  half  of  the  debt  of 
the  Compan}',  —  the  debt  on  the  Hartford,  Providence,  and  Fish¬ 
kill  Road. 

Mr.  Chapin.  The  State  would  then  have  a  bottom  mortgage  ? 

Mr.  Clark.  Yes,  sir :  any  mortgage  w’ould  be  a  bottom  mort¬ 
gage  as  to  the  State’s  interest,  or  the  interest  of  an}^  other  stock¬ 
holder. 

Mr.  Chapin.  Has  your  company  made  an}’  recommendation? 

Mr.  Clark.  That  is  rather  a  question  for  the  President  than 
for  me. 


STATEMENT  OF  THE  PRESIDENT. 

Mr.  Hart.  That  is  set  forth  in  the  proposition  made  by  the 
Directors  of  this  Company  to  the  Special  Committee  which  sat  dur¬ 
ing  the  recess  last  summer.  It  ma}’  be  found  printed  in  their  re¬ 
port,  which  is  the  subject  we  are  now  considering.  I  suppose  the 
matter  before  the  Committee  is  to  consider  what  the  State  will  do 
with  its  interest  in  this  road  ;  and  that  is  the  whole  of  it.  In  order 
to  make  up  their  minds  upon  that  point,  we  come  here  to  tell  }’ou 
the  condition  of  the  property,  and  its  capacity  for  earning  money. 

You  have  the  Report  made  by  the  Railroad  Commissioners  to  the 
last  Legislature ;  and  that  embodies  probabty  all  the  information 
that  it  is  possible  for  us  to  give,  or  for  you  to  obtain,  were  a  dozen 
more  committees  to  sit  upon  it.  They  have  given  }*ou  the  results  of 
their  judgments  upon  it.  It  seems  to  me  to  be  a  question,  whether 
you  have  confidence  in  those  statements ;  and,  if  so,  }’ou  will  be 
satisfied  that  it  presents  ample  security  for  the  loan  asked  for  by 
us  in  our  proposition.  You  are  considering  whether  the  proposi¬ 
tion  submitted  is  one  that  it  would  be  for  your  interest  to  adopt. 
You  are  the  Railroad  Company,  and  you  control  the  railroad  as  it 
stands  to-day.  You  control  it ;  for  the  vote  thrown  by  the  State  of 
Massachusetts  upon  its  stock  controls  the  election  of  the  Directors 
of  the  Company. 


120  APPENDIX.  [Apr. 

Now,  the  statement  which  has  been  made  by  the  General  Man¬ 
ager,  as  it  seems  to  me,  is  quite  exhaustive  and  clear. 

The  Company’s  Proposition. 

What  would  be  the  result,  provided  the  proposition  which  we 
have  made  to  the  Committee  (and  from  that  Committee  we  renew  it 
to  you),  — provided  what  we  undertake  to  do  there  is  carried  out? 
It  will  save  the  State  any  further  loss  in  consequence  of  its  loan 
to  the  old  Company  by  our  paying  the  interest  as  it  becomes  due, 
semi-annually. 

Ity  referring  to  the  State  Treasurer’s  Report  of  this  3^ear  and 
last  3’ear,  }Tou  will  see  that  his  Report  of  last  year  states  the  sink¬ 
ing-fund  to  be  $963,800.  This  year  he  states  it  to  be  $1,027,000. 
Somewhere  between  $60,000  and  $70,000  has  been  added  to  the 
sinking-fund  during  the  past  year.  It  is  twenty-two  years  before 
the  principal  of  that  debt  becomes  due.  It  is  over  a  million  dol¬ 
lars  to-day :  it  will  double  in  eleven  years,  which  will  make  it  two 
millions  ;  and  in  the  balance  of  the  term  it  will  grow  to  four  mil¬ 
lions.  So  I  say  the  principal  of  that  debt  is  provided  for  ampty, 
as  we  presume. 

Six  Millions  in  Taxes  saved  the  State. 

Now,  there  is  nothing  that  bears  heavily  upon  the  State  except 
the  interest  on  the  money  it  loaned  to  the  Boston,  Hartford,  and 
Erie  Railroad  Compai^  ;  and  we  assume  to  pay  that  interest,  if  our 
proposition  is  accepted.  The  result  to  the  State  will  be  the  sav¬ 
ing  of  $8,000,000  and  upwards,  at  six  per  cent  interest.  I  have 
had  the  calculations  made  ;  and  it  appears  that  if  we  should  as¬ 
sume  on  the  1st  of  July  next  the  payment  which  the  State  will 
otherwise  have  to  make,  of  $90,000,  and  so  continue  making  the 
payments  on  the  succeeding  1st  of  July  and  1st  of  January  until 
the  year  1900,  the  State  will  save  the  amount  of  $8,011,172,  if 
the  calculations  are  made  at  six  per  cent.  If  the  proposition  of 
the  Railroad  Company  is  not  accepted,  that  is  the  amount  which 
will  have  to  be  raised  bj^  the  State  from  the  taxation  of  its  citi¬ 
zens. 

br  reckoning  interest  only  at  four  per  cent  per  annum,  with  the 
same  semi-annual  pa}Tments,  the  amount  which  the  State  would 
save  by  accepting  the  proposition  would  be  $6,242,000,  —  a  larger 
sum  than  the  entire  loan  asked  for  by'  the  Company.  Thejr  are 
large  figures. 

Q.  Your  proposition  is,  if  this  loan  is  made,  and  if  its  provis¬ 
ions  are  carried  out? 


1878.] 


APPENDIX. 


121 


Mr.  Hart.  Certainty. 
f  Q.  It  will  save  the  State  that  expense? 

Mr.  Hart.  Yes,  sir.  Now,  what  is  the  ability  of  the  road  to 
carry  out  such  a  proposition  ?  The  Corporation  will  save  money, 
even  paying  you  the  amount  stated  ;  as  you  will  see,  if  you  think  of 
it  a  moment.  Suppose  we  sell  seven  millions  of  bonds  at  ninety 
cents  :  it  would  bring  us  six  millions  three  hundred  thousand  dol¬ 
lars.  If  we  have  six  millions  of  the  State  of  Massachusetts  five- 
per-cent  bonds,  it  would  bring  us  an  equal  amount  of  money,  and 
probably  more.  Now,  suppose  ninety  per  cent  to  be  the  price 
at  which  we  sell  our  seven-per-cent  bonds.  The  interest  upon 
that  seven  millions  at  seven  per  cent  would  be  $490,000  per 
annum  that  we  should  have  to  pay.  Five  per  cent  on  the  $6,000,000 
we  now  ask  of  the  State,  or  $300,000,  which  is  what  this  money 
will  cost  the  State  per  annum,  and  five  percent  on  the  $3,600,000  of 
stock  which  the  State  owns,  or  $180,000  per  annum,  makes  in  all 
$480,000  ;  which  is  what  the  Company  will  have  to  pay  if  its 
proposition  is  accepted.  So  you  see  the  undertaking  is  not  a 
burdensome  one.  It  is  a  reasonable  one,  as  it  seems  to  me,  for  us 
to  make. 

As  our  General  Manager  has  stated,  there  were  men,  and  very 
sensible  men  too,  —  men  whose  judgments  were  taken  on  State 
Street  as  readily  as  anybody’s,  as  being  sound,  —  who  thought  this 
property  would  pay  six  per  cent  interest  on  $40,000,000. 

Q.  That  means,  provided  it  was  finished? 

Mr.  Hart.  Yes,  sir.  Now,  I  do  not  share  in  that  view,  and 
did  not  then,  although  I  had  nothing  to  do  with  the  road  at  that 
time.  But  I  do  believe  it  is  perfect  security  for  one-fifth  of  that. 
I  refer  to  this  amount  of  six  millions  in  consequence  of  the  testi¬ 
mony  of  one  of  the  gentlemen  at  the  last  hearing.  You  remember 
one  gentleman  testified  that  he  was  strongly  in  favor  of  the  State 
loaning  four  millions  of  dollars,  so  as  to  relieve  the  property  from 
its  mortgage-debt.  He  admitted  that  it  was  his  own  proposition 
in  the  Committee.  One  other  gentleman  in  the  Committee  thought 
that  was  not  a  matter  to  be  considered,  inasmuch  as  the  Corpora¬ 
tion  had  never  asked  for  that.  The  Corporation  have  made  but 
one  proposition,  and  that  was  for  six  millions  of  dollars. 

I  feel,  and  all  of  the  management  feel,  that  it  is  for  the  inter¬ 
ests  of  the  State,  if  it  is  to  do  an}’  thing,  that  it  should  do  the 
whole.  But  it  is  quite  possible,  that,  upon  terms  that  might  be 
agreed  upon,  it  would  be  expedient  to  take  a  smaller  sum  ;  but  the 
very  great  importance  of  getting  possession  of  the  whole  of  this 
road,  and  making  productive  the  large  expenditure  which  has 


122  APPENDIX.  [Apr. 

already  been  made  upon  the  unfinished  part  at  the  relatively  small 
amount  which  is  necessary  to  complete  it,  is  apparent. 

Cost  of  completing  the  Road. 

Two  millions  of  dollars  is  the  estimate  which  has  been  stated 
for  completing  the  road  to  the  Hudson  River.  The  exact  figures, 
as  made  up  by  the  engineers  from  actual  measurements  and  sur- 
\eys,  are  one  million  five  hundred  and  forty-nine  thousand  dollars. 
I  think,  as  there  has  been  a  considerable  reduction  in  the  rate  of 
wages  and  the  price  of  materials,  &c.,  since  the  estimate  was  made, 
ver}T  likely  it  could  be  done  for  less ;  but  as  I  never  want  to  be 
disappointed,  and  have  an  enterprise  of  this  sort  cost  more  than  is 
estimated,  we  set  it  down  at  two  millions.  The  interest  of  that 
two  millions  of  dollars  at  five  per  cent  is  one  hundred  thousand 
dollars.  Is  it  not  reasonable  to  suppose,  that  with  that  portion  of 
the  road  completed,  making  the  road  a  through  line  to  the  West, 
the  increased  income  would  prove  the  expenditure  to  complete  it  a 
judicious  one? 

The  Chairman.  If  it  will  not  be  an  interruption,  right  there, 
can  you  enlarge  some  on  what  would  be  done  upon  it,  its  new 
resources  ? 

Mr.  Hart.  I  will  leave  that  to  the  gentlemen  who  are  here. 
They  are  citizens  of  New  York,  and  Directors  in  our  Company, — 
gentlemen  who,  from  the  first,  had  very  great  confidence  in  this 
enterprise.  One  of  them  has  been  for  many  }Tears  a  Director  in 
the  Delaware  and  Hudson  Canal  Company ;  and  he  can  inform  the 
Committee  in  relation  to  the  business  which  will  come  from  the 
other  side  of  the  river. 

The  Chairman.  That  will  be  satisfactoiy,  of  course. 

Advantages  over  Boston  and  Albany  Railroad. 

Mr.  Hart.  Before  I  ask  Col.  Cannon  to  address  the  Commit¬ 
tee,  I  want  to  refer  to  another  fact.  I  have  a  statement  here  in 
regard  to  the  Boston  and  Albany  Road,  which  is  an  exceptionally 
successful  corporation,  beginning  at  Boston,  and  running  out 
through  the  towns  and  cities  and  villages  on  the  line  of  the  Boston 
and  Albany  and  the  New- York  and  New-England,  as  taken  from 
the  census  ;  and  it  shows  that  there  is  a  larger  population  and  a 
larger  valuation  on  the  line  of  our  road  than  upon  the  line  of  the 
Boston  and  Albany.  So  much  for  the  local  interests  which  con¬ 
tribute  to  the  maintenance  of  a  railroad. 

The  Chairman.  On  the  entire  line  ? 

Mr.  Hart.  The  entire  line.  We  give  the  Boston  and  Albany 


1878.] 


APPENDIX. 


123 


the  benefit  of  the  population  of  Alban}’,  regarding  the  city  of 
Albany  as  the  terminus  of  the  Boston  and  Albany  at  the  western 
end  ;  and  we  take  to  ourselves  Newburg,  which  is  on  the  west  bank 
of  the  Hudson,  opposite  Fishkill.  Of  course,  that  is  a  disadvan¬ 
tage  to  us.  How  many  inhabitants  has  Albany,  Col.  Cannon? 

Col.  Cannon.  I  think,  about  eighty-five  thousand. 

Mr.  Hart.  And  Newburg  about  seventeen  thousand? 

Mr.  Roosevelt.  About  fourteen  thousand. 

Mr.  Hart.  By  this  statement,  which  is  at  your  service,  yoq 
will  see  that  we  might  expect  locally  as  good  business  as  the  Bos¬ 
ton  and  Albany. 

Now,  we  want  what  the  Boston  and  Albany  has,  and  which  no 
other  road  running  into  Boston  has  to  an  equal  extent ;  and  that 
is,  through  connections,  through  business. 

The  whole  question  that  will  present  itself  to  the  minds  of  the 
Legislature,  as  it  seems  to  me,  comes  to  this :  What  is  the  ability 
of  this  Corporation,  wThich  is  ready  to  undertake  this  thing,  to 
perform  it  ?  That  is  all  there  is  to  this  question ;  because  it  is  a 
good  trade  to  the  State,  if  the  Corporation  are  able  to  carry  it  out. 

Now,  by  the  Report  of  the  Boston  and  Albany  Railroad  Company 
in  1876  (I  have  not  seen  the  Report  of  last  year  to  see  how  it 
corresponds) ,  it  appears  that  they  paid  nine  per  cent  on  twenty 
millions  of  stock,  and  six  or  seven  per  cent  on  seven  millions  of 
bonds,  —  about  two  millions  and  a  quarter. 

Now,  if  the  Boston  and  Albany,  with  less  local  population  and 
less  valuation,  can  pay  two  millions  and  a  quarter  net  out  of  its 
earnings,  is  it  not  reasonable  to  suppose  that  the  New- York  and 
New-England  Railroad  Company,  with  through  connections  and 
one  hundred  miles  more  of  road,  could  pay  $480,000  a  year?  — 
particularly  as  it  now  pays  more  than  four  hundred  thousand  net 
without  connections. 

Gentlemen  of  the  Committee,  I  would  like  to  introduce  to  you 
Col.  Cannon  of  our  Board  of  Directors,  and  a  citizen  of  New  York, 
who  many  years  ago  began  to  buy  Berdell  bonds  at  fifty  and  sixty, 
having,  as  he  believed,  a  pretty  sure  knowledge  of  the  prospective 
value  of  this  property.  He  can  give  you  all  the  information  I 
think  that  is  required  in  regard  to  the  coal  traffic  particularly,  hav¬ 
ing  been  for  a  long  time  a  Director  of  the  Delaware  and  Hudson 
Canal  Company. 

Another  thing  should  be  bore  in  mind  by  the  Committee ;  that 
is,  we  run  through  a  manufacturing  population  where  the  consump¬ 
tion  of  coal  is  very  great.  The  usual  computation  in  regard  to 
affording  business  for  a  railroad  is,  I  believe,  that  a  population  of 


124 


APPENDIX. 


[Apr. 


one  thousand  persons  will  consume  a  thousand  tons  of  coal  a  year, 
and  will  afford  that  amount  of  business  to  any  road  which  supplies 
them.  Where  there  is  a  manufacturing  community,  of  course  the 
consumption  is  very  much  greater. 

Mr.  Hart.  What  is  the  population  of  Troy? 

Col.  Cannon.  The  two  Troys,  about  seventy  thousand. 

Mr.  Hart.  What  is  the  consumption  of  coal  in  that  city'  ? 

Col.  Cannon.  Between  four  hundred  and  five  hundred  thousand 
tons. 

Mr.  Hart.  Affording  a  great  business  for  the  railroad. 

Mr.  Tucker  (of  the  Committee).  On  the  matter  of  competi¬ 
tion  with  water,  something  was  said  at  the  last  meeting,  that,  in 
Connecticut  and  Rhode  Island,  your  road  would  be  obliged  to  com¬ 
pete  for  business  with  the  water  transportation,  and  that  you  could 
not  do  it  to  advantage.  As  I  understood  it,  the  Erie  Railway  was 
running  to  Jersey  City,  and  the}'  took  freight  coming  from  the 
West  to  that  point ;  and  steamers  bring  it  round  into  Rhode  Island 
and  Connecticut,  as  well  as  to  Boston,  on  such  terms,  that  you  will 
not  be  able  to  compete  with  them.  If  you  or  any  of  the  other 
gentlemen  have  any  information  to  give  on  that  point,  I  should  be 
very  glad  to  hear  it. 

Mr.  Hart.  Col.  Cannon  will  do  that. 

STATEMENT  OF  LE  GRAND  B.  CANNON. 

Col.  L.  G.  B.  Cannon.  Mr.  Chairman  and  Gentlemen  of  the 
Committee,  I  may  state  that  this  is  the  first  time  in  m3’  life  that 
I  ever  appeared  before  a  Legislative  Committee  for  the  purpose  of 
either  advocating  or  opposing  an}'  project. 

I  do  not  know  that  I  can  add  in  any  measure  to  the  very  clear 
and  full  history  that  has  been  given  by  the  General  Manager  of 
this  Company  in  regard  to  its  affairs.  Perhaps  it  may  be  proper 
to  state  that  my  association  with  this  Corporation  was  not  only 
accidental  in  part,  but  originally  a  very  unwilling  one.  We  felt  in 
New  York,  as  you  felt  very  much  here  in  Massachusetts,  that  this 
was  a  Boston,  Hartford,  and  Erie  Corporation,  and  was  a  great 
leprous  body  ;  and  therefore  it  was  with  great  reluctance  that  men 
who  felt  they  had  any  position  in  the  community  were  disposed  in 
any  way  to  be  connected  with  it.  It  was  only  by  the  continued 
persistence  —  I  might  say,  as  has  been  said  by  one  of  your  New- 
England  orators,  by  a  sort  of  demoniac  energy  —  of  the  President 
of  this  Company  that  I  was  forced  into  it. 

When  we  came  here  for  the  first  time  to  look  at  this  property, 


1878.] 


APPENDIX. 


125 


before  assenting  to  our  election  as  Directors  (for  we  reserved  the 
right  to  examine  the  property,  and  then  determine) ,  we  went  over 
it,  and  found  it  in  so  much  better  condition  than  we  had  supposed 
any  property  managed  by  Receivers  and  by  Trustees  would  be  in, 
that  we  made  up  our  minds,  after  coming  over  here  and  consulting 
together,  that  there  must  be  a  cat  in  the  meal,  and  we  could  not 
see  it.  We  asked,  Why  is  it  that  this  property  remains  in  this 
condition?  This  is  before  }Tour  eyes  in  the  city  of  Boston,  and 
State  of  Massachusetts  ;  and  the  State  has  a  very  large  interest  in 
it,  shown  by  having  originally  loaned  so  large  a  sum  of  money ; 
and  we  in  New  York  have  no  other  interest,  except  as  stock¬ 
holders. 

I  don’t  know,  after  the  brief  introduction  which  has  been  given 
me  to  your  body  that  I  have  been  the  purchaser  of  these  bonds  at 
forty  and  fifty,  that  you  will  have  ai^  sort  of  confidence  in  my 
judgment :  nevertheless,  I  have  a  lot  of  them. 

I  think  it  may  be  fairly  stated,  that  from  the  time  the  Corpora¬ 
tion  failed,  and  the  road  passed  into  the  hands  of  Receivers,  then 
into  the  hands  of  Trustees,  and  finally  into  the  new  Corporation, 
with  all  manner  of  discouragements,  without  an}7,  sort  of  credit, 
with  the  avoidance  of  it  by  .everybody  and  ever}7,  thing,  with  a 
general  depression  of  business  through  the  country,  by  which 
every  interest  has  suffered,  it  stands  a  singular  instance,  having 
established  a  good  credit,  and  that  too,  I  may  say,  without  any 
foreign  aid.  Now,  we  gentlemen  in  the  direction  have  had  nothing 
to  do  with  the  details  of  this  management.  Whatever  credit  of 
management  or  of  administration  there  is  connected  with  it  is 
solely  due  to  the  General  Manager  and  to  the  President.  They 
have  worked  this  thing  with  extraordinary  ability  all  the  way 
through ;  and  have  brought  it  up  into  such  good  credit  abroad, 
that  it  has  rather  surprised  us. 

The  Financial  Question. 

We  appear  here  substantially  as  the  servants  of  the  State  of 
Massachusetts.  They  really  represent  this  Corporation  to-daj’ ;  for, 
with  a  small  exception,  they  are  the  only  ones  who  have  converted 
their  bonds  into  stock.  As  I  understand  the  proposition  made  by 
the  Board,  it  comes  before  j’our  Committee  strictly  as  a  financial 
question.  You  have  an  interest  here  of  three,  nearljT  four  millions 
of  dollars,  in  stock  of  this  Corporation,  which  may  be  said  to  be 
almost  worthless  as  it  stands  to-day.  It  has  a  nominal  market 
value  of  ten  or  twelve  cents.  Now,  then,  the  proposition  of  3’our 
servants,  of  this  Board  of  Directors,  is  to  make  yours  practically  a 


126 


APPENDIX. 


[Apr- 


preferred  debt ;  and  the}’  show  you  what  they  have  done  with  this 
incomplete  road,  and  what  they  believe  they  can  do  in  reference  to 
meeting  this  proposition. 

Now,  this  road,  during  the  last  year,  as  the  Railroad  Company’s 
accounts  are  kept  and  accepted  by  the  Railroad  Commissioners 
and  legislative  bodies,  who  prescribe  the  manner  in  which  they 
shall  keep  their  accounts,  — this  portion  of  the  road,  this  one  hun¬ 
dred  and  thirty-nine  miles  of  railroad,  shows  a  credit  to  profit  and 
loss  of  one  hundred  and  eighty-four  thousand  dollars  ;  and  the 
Hartford,  Providence,  and  Fishkill  Road,  something  over  two  hun¬ 
dred  thousand  dollars  ;  and  the  Committee  who  have  examined  it 
are  entirely  persuaded  —  I  believe  they  yielded,  at  all  events,  a 
reluctant  assent  —  that  we  are  perfectly  able  to  meet  the  interest 
upon  a  four-million  loan,  and  that,  too,  with  the  road  under  two 
different  administrations.  And  there  is  a  large  amount  of  money 
expended  upon  the  portion  of  the  road  between  the  Hudson  River 
and  Waterbury,  yielding  no  income,  but  a  drain  upon  the  present 
business  of  the  Company. 

Why  the  Other  Stockholders  should  assent. 

Now,  the  question  may  naturally  be  asked  by  you,  gentlemen, 
Why  should  we,  why  should  I,  representing  many  of  these  bonds, — 
for  it  must  be  presumed  I  have  an  object,  — why  should  I  consent 
that  the  stock  held  by  the  State,  precisely  the  same  as  that  I  hold, 
—  why  should  I  be  willing  that  it  should  have  a  preference  over 
mine?  For  the  simple  reason  that  I  believe,  if  we  can  thus  raise  the 
money  to  complete  this  road,  we  can  well  afford  to  pay  it.  Mr. 
Hart  has  shown,  so  far  as  the  interest  account  is  concerned,  that 
we  are  absolute  gainers,  that  the  outside  bondholders  are  absolute 
gainers,  by  paying  you,  and  making  this  preferred  debt,  rather 
than  go  into  the  market  and  issue  our  bonds,  and  sell  them  at  a 
heavy  discount.  Therefore  we  can  afford  to  do  it.  We  can  afford 
to  make  yours  a  preferred  stock,  and  take  our  chances  with  the 
balance,  knowing  that  our  money  will  be  forthcoming. 

Coal  Business  of  the  Road. 

Now,  in  the  origin  of  this  road,  the  very  object  of  the  State  of 
Massachusetts  in  granting  its  credit  was  to  gbt  a  cheap  avenue  to 
the  West;  or  an  avenue  to  the  West  that  would  furnish  cheap 
transportation,  especially  for  coal.  Now,  before  I  had  any  interest 
in  this  road  whatever,  while  it  was  in  some  way  or  other  associated 
with  the  Erie,  the  Delaware  and  Hudson  Company,  having  a  large 
interest  in  the  coal  business,  went  into  a  calculation  to  ascertain 


1878.] 


APPENDIX. 


127 


what  amount  of  coal  would  be  consumed  on  this  line,  independent 
of  the  city  of  Boston.  We  don’t  presume  to  bring  coal  by  this 
line  to  the  city  of  Boston  ;  that  is  impossible  :  but  we  can  approach 
very  near  to  it  by  rail.  We  found  some  four  or  five  3’ears  ago  that 
there  would  be  consumed  on  this  line  of  road  not  less  than  seven 
hundred  thousand  tons  of  coal  a  year :  for  it  is  fair  to  assume,  as 
it  proves  true,  that  the  population  through  a  countiy  which  is  sup¬ 
plied  with  anthracite  coal  consume  about  a  ton  a  3’ear  per  capita 
of  the  population  on  the  line  ;  that  is,  for  domestic  use  merety. 
The  rule  that  we  apply  to  the  consumption  of  coal  applies  also  to 
the  consumption  of  flour.  We  had  agencies,  sending  our  coal 
to  the  city  of  Boston  and  Providence,  and  through  those  cities  to 
all  the  points  reached  by  this  line,  taking  the  very  lowest  rates  of 
freight. 

To  give  3’ou  an  illustration :  Assume  that  coal  can  be  carried 
from  tidal  points  on  the  Hudson  to  Providence  by  water  for  a  sum 
not  exceeding  seventy  cents  a  ton,  which  30U  will  readity  see  is 
extremely  low  price,  but  taking  the  lowest  possible  price,  the 
question  is  asked,  How  can  we  compete  with  them?  Take  the 
Penns3’lvania  Coal  Company,  whose  terminal  point  on  the  Hudson 
is  directly  opposite  where  this  road  touches  the  river,  to  sa3^  noth¬ 
ing  of  the  Delaware  and  Hudson  Canal  Compaq',  just  north  of 
them,  who  can  discharge  a  ton  of  coal  at  Fishkill  almost  as  cheaply 
and  as  well  as  at  Rondout,  which  is  the  terminal  point  of  its  canal 
on  the  Hudson,  it  costing  but  three  or  four  cents  a  ton  more  to 
discharge  it  at  Fishkill  than  at  Rondout,  which  is  the  nearest  point 
to  which  coal  can  be  brought  b3T  water  from  the  mines,  and  where 
shoots  are  in  full  working  condition  to  the  extent  of  a  million-  and 
a  half  tons  a  year.  W e  wanted  an  estimate  in  regard  to  the 
matter  ;  and  taking  the  lowest  rate  for  water  transportation  to  the 
city  of  Providence,  which  we  will  assume  to  be  seventy  cents  a 
ton,  then  assuming  the  cost  of  transfer,  and  waste  of  transfer,  to 
be  about  ten  or  twelve  cents,  and  then  the  short  haul  of  fifteen  or 
twent3T  miles,  which  is  alwa3’s  an  expensive  haul,  not  less  than  two 
or  three  cents  a  ton  a  mile,  and  we  found  that  we  could,  at  three- 
quarters  of  a  cent  a  mile,  bring  coal,  and  la3T  it  down,  sa3T,  at 
Baltic,  and  then  compete  with  the  coal  brought  round  b3^  water, 
with  the  charges  of  transfer.  We  found  that  we  could  supply  the 
coal  all  the  wa3*  up  to  within  a  veiy  short  distance  of  the  cit3T  of 
Hartford  (though  we  could  not  suppty  Hartford  itself,  it  being  on 
the  riyer)  at  an  average  cost  of  two  cents  a  ton  a  mile ;  and  there 
was  no  other  line  that  could  compete  with  us. 

In  other  words,  aggregating  the  whole  of  this,  we  assume  that 


128 


APPENDIX. 


[Apr. 


the  revenue  of  this  road,  if  it  were  completed  through  to  a  con¬ 
nection  with  the  coal  lines,  would  not  be  less  than  $1,250,000  a 
year  over  that  portion  of  the  line. 

Advantages  of  Rail  over  Water  Borne  Coal. 

It  is  difficult  to  say  how  low  a  railwa}”  company  can  cany  coal. 
It  can  certainly  carry  coal  cheaper  than  any  other  freight,  and  for 
these  reasons  :  It  comes  in  whole  train-loads ;  therefore  }’ou  get 
great  volume.  It  is  a  freight  that  loads  and  unloads  itself :  it  is 
done  by  gravity.  Besides  that,  it  is  the  easiest  freight  for  the 
road-bed  known,  because  it  is  elastic  ;  and  every  consumer  prefers 
to  take  coal  that  is  brought  by  rail,  rather  than  that  by  water,  be¬ 
cause  it  is  cleaner :  the  slight  motion  it  gets  on  the  way  makes  the 
coal  very  clean.  And  another  thing :  fresh-mined  coal  is  very 
much  more  valuable  than  that  exposed  to  the  weather.  The  effect 
of  the  weather  on  anthracite  coal  is,  that  it  takes  up  a  large 
amount  of  ox}*gen  ;  and,  when  it  comes  to  be  used  as  fuel,  it  slacks, 
and  has  too  much  flame,  —  so  much  so,  that  for  manufacturing  pur¬ 
poses,  with  a  market-value  of  $4.50  a  ton,  we  pay  for  iron  making 
$5  —  say  fifty  cents  more  a  ton  —  for  coal  brought  by  rail,  rather 
than  receive  it  by  water  after  it  has  been  piled  or  stocked.  It  is 
found  to  be  absolute  economy  to  pay  so  much  more  for  coal  that 
comes  by  rail :  it  will  produce  so  much  more  iron. 

Massachusetts  True  to  her  Traditions. 

I  do  not  believe  that  it  would  be  true  to  the  traditions  of  Massa¬ 
chusetts  to  be  satisfied  with  any  thing  that  was  purely  local.  She 
has  been  reaching  out  and  reaching  out,  and  successfully,  to  the 
remotest  parts  of  the  county^,  to  get  business.  What  she  is  con¬ 
tending  for  now,  and  has  been  contending  for,  is  cheap  transporta¬ 
tion  to  the  West.  I  think  an}T  thing  which  would  narrow  her 
down  to  what  would  be  local  would  change  the  character  of  New- 
England  people.  We  in  New  York  think  that  every  thing  East  is 
wonderfully  aggressive ;  and  we  cannot  but  admire  it,  for  the 
reason,  that  wherever  Massachusetts  or  the  East  goes,  and  finds  a 
good  pair  of  shoes,  she  gets  into  them,  and  is  ver}T  apt  to  stay. 

I  don’t  believe  for  one  moment  that  this  Company,  or  that  the 
managers  of  this  line,  would  be  justified,  except  they  were  continu¬ 
ally  reaching  out  to  get  new  business.  And  not  only  that,  but  we 
ought  to  try  experiments  alwaj^s,  —  new  avenues,  new  lines  in  new 
directions,  —  even  if  we  anticipate,  that,  in  the  beginning,  it  has 
got  to  be  done  at  a  loss.  I  don’t  think  any  man  ever  starts  in  life 
without  being  obliged  to  make  a  considerable  expenditure  of 


1878.] 


APPENDIX. 


129 


money  in  the  first  instance  to  get  his  business  well  established ; 
and  then  he  begins  to  get  a  profit  from  it. 

I  don’t  know  that  I  have  any  thing  further  to  say  but  to  thank 
you  for  }Tour  kind  attention. 

Mr.  Tucker.  I  understood  }Tou  to  say  }tou  could  not  compete 
at  Hartford  with  the  water.  Now  take  a  point  twent}r-five  miles 
east  of  Hartford  on  this  road.  Could  you  not  get  coal  there  more 
cheaply  by  bringing  it  to  Hartford  by  water,  and  then  by  rail, 
than  to  bring  it  all  the  way  by  rail  direct?  Which  would  be  the 
cheaper? 

Mr.  Cannon.  By  bringing  it  direct,  sir.  That  is  the  very 
point.  By  bringing  coal  to  Hartford  by  wrater,  the  cost  of  reship¬ 
ment  would  be  ten  to  fifteen  cents  a  ton  ;  and  a  certain  waste  is 
alwaj’s  connected  with  transshipment.  Then  they  would  have  a 
short  haul  over  the  railroad,  for  which  they  would  have  to  pay  a 
high  rate ;  for  the  simple  reason,  that  if  an  engine  starts  from 
Boston  to  go  through  to  the  Hudson  River,  perhaps  burdened  with 
a  train  of  twenty-five  cars,  it  goes  right  along  to  its  destination. 
Another  train  starts  with  three,  four,  or  five  cars.  The  difference 
in  the  cost  of  transporting  the  two  trains  is  not  appreciable. 
Whether  the  engine  has  attached  to  it  cars  to  the  extent  of  its 
capacitj^,  or  three  or  four  cars,  the  expense  of  doing  the  business 
is  substantially  the  same.  So  the  absolute  cost  of  carrying  a 
train  a  hundred  and  fifty  miles,  when  she  starts  to  run  through 
with  it,  would  be  very  little  decreased  in  consequence  of  dropping 
those  cars  along  at  several  points. 

Mr.  Tucker.  I  see  that  might  apply  to  points  west  of  Hart¬ 
ford.  Your  position  is,  that,  after  you  get  the  coal  on  a  car  ready 
to  start,  it  would  be  cheaper  to  bring  it  all  the  way  through  by 
rail,  than  to  bring  it  part  way  by  water,  and  then  ship  it  again? 

Col.  Cannon.  Yes,  sir. 

Mr.  Tucker.  That  would  apply  to  the  city  of  Providence  as 
well? 

Col.  Cannon.  To  answer  that  more  fulty,  the  Agent  of  the 
Delaware  and  Hudson  Canal  Compaq7  at  Providence  is  one  of 
the  largest  dealers  there.  Some  three  or  four  3’ears  ago  I  had  an 
interview  with  him,  and  asked  him  all  these  questions,  what  the 
cost  of  reshipment  and  the  waste  would  be  likely  to  be.  We 
shipped  to  him  about  two  hundred  thousand  tons  a  3^ear,  and 
wanted  to  know  what  the  comparative  cost  would  be  ;  and  we  found 
that  where  these  Baltic  Mills  are,  half  way  between  Hartford  and 
Providence,  we  could  afford  to  bring  the  coal  by  rail  all  the  wa3r. 
Not  that  we  would  make  an3T  special  profit  on  it,  but  that  it  would 


APPENDIX. 


130 


[Apr. 


be  an  object  to  do  it,  as  it  would  strengthen  our  trains  all  the  way 
through. 

Mr.  Tucker.  That  is,  in  regard  to  the  transportation  of  coal? 
How  would  it  be  with  other  freight  from  the  West? 

Contracts  with  Erie  and  Pennsylvania  Railroad  Companies. 

Col.  Cannon.  I  can  onl}r  say  this,  that  the  Penns}dvania  Rail¬ 
road  Company  are  very  desirous  of  getting  connection  with  some 
direct  route  to  the  East ;  and  they  have  made  a  proposition  to  us, 
if  we  will  build  this  road  through.  The  Erie  also  have  said,  that, 
if  we  would  complete  this  road,  they  would  bring  us  their  business, 
and  connect  directly  with  us.  Furthermore,  the}?-  have  made  a 
proposition  that  they  would  give  this  Corporation,  as  a  bonus,  ten 
per  cent  over  the  pro  rata  on  all  the  business  of  the  line,  and  they 
would  enter  into  a  contract  for  ten  or  fifteen  years.  The}r  would 
not  only  give  us  pro  rata ,  but  they  would  give  us  a  bonus.  This 
road,  if  completed,  can  readily  be  reached  by  the  Erie,  the  Penn¬ 
sylvania  Central,  and  the  Delaware  and  Hudson  Canal  Compan}' ; 
and,  for  that  reason,  the  managers  of  this  Corporation  have  not  de¬ 
clared  where  will  be  their  terminal  point.  Our  survej’s  make  it 
fifteen  miles  to  Fishkill,  about  fifteen  miles  to  Poughkeepsie,  and 
about  fifteen  miles  to  Fort  Montgomerj7.  One  of  those  three 
places  will  be  the  point  for  this  road  to  cross  the  Hudson  ;  but  we 
have  never  encouraged  anybody  by  declaring  where  we  were  going. 

Mr.  Gilbert.  If  the  Boston  and  Albany,  which  is  so  well  and 
thoroughly  equipped,  and  has  good  facilities  at  the  Hudson  for 
bringing  coal,  cannot  supply  the  city  of  Springfield  and  the  city 
of  Worcester  with  their  coal,  how  can  }Tou  expect  that  }Tourroad, 
completed  to  the  Hudson,  would  supply  your  line  of  road  east  of 
Hartford? 

Col.  Cannon.  They  do:  the  city  of  Springfield  is  entirely 
supplied  with  coal  — 

Mr.  Gilbert.  Not  by  the  Boston  and  Albany  Road. 

Col.  Cannon.  Then  it  is  because  the  Boston  and  Albany  does 
not  compete  with  the  lines  from  the  Sound. 

Mr.  Gilbert.  A  large  portion  of  the  coal  that  comes  to  Spring- 
field  comes  by  water  to  New  Haven,  and  then  by  rail  to  Spring- 
field. 

Mr.  Cannon.  You  can  very  readily  see  that  the  distance  is 
much  less  :  it  is  about  one  hundred  miles  from  Hudson,  and  about 
sixty  from  New  Haven.  \ 

Mr.  Clark.  The  reason  may  be  one  of  policy  that  intervenes 
to  change  the  natural  course  of  trade.  The  relations  of  the  Bos- 


1878.] 


APPENDIX. 


181 


ton  and  Albany,  and  the  New-York,  NewHIaven,  and  Hartford 
Railroad  Companies,  so  far  as  the  business  between  Boston  and 
New  York  is  concerned,  are  rather  complex ;  for  the  Boston  and 
Albany  seeks  the  Western  business,  and  seeks  to  do  it  by  its 
longest  haul.  It  also  desires  to  attract  and  maintain  a  large  busi¬ 
ness  between  Boston  and  New  York  ;  but  it  is  dependent  entirely 
upon  the  New-York,  New-Haven,  and  Hartford  Road  to  get  its 
outlet  into  New  York,  and  to  reciprocate  and  receive  return  busi¬ 
ness.  But  the  New-York,  New-Haven,  and  Hartford  Road  is  not 
at  all  dependent  on  the  Boston  and  Albany  Railroad  for  connec¬ 
tion  with  the  city  of  Boston,  having  the  Shore  Line  and  the  Line 
of  which  we  form  a  part,  either  of  which  is  ready  to  take  what 
business  is  offered,  and  to  give  what  business  we  can. 

Now,  the  Boston  and  Albany  Road  has  supplied  coal  in  the  city 
of  Springfield  ;  and  could  supply  the  city  of  Springfield  at  a  profit, 
if  it  were  not  for  a  matter  of  policy.  Competition  between  the 
two  companies  for  the  business  would  arise  at  once  ;  and  perhaps 
it  is  not  policy  for  the  Boston  and  Albany  to  make  rates  so  that 
the  coal  should  not  come  from  the  Sound  up  the  river  to  Spring- 
field. 

Mr.  Gilbert.  How  about  the  city  of  Worcester? 

Competition  with  Boston  and  Albany. 

Mr.  Clark.  In  the  city  of  Worcester,  the  Boston  and  Alban}^ 
is  our  worst  competitor.  We  operate  the  Norwich  and  Worcester 
road,  and  the  Providence  and  Worcester  and  the  Boston  and 
Albany  Roads  are  our  competitors  ;  and  the  Boston  and  Albany  is 
the  worst  competitor  we  have  at  Worcester,  and  it  takes  the  coal 
from  both  ends  of  its  road.  It  takes  coal  from  Boston  to  Worces¬ 
ter,  and  from  Hudson  on  the  Hudson  River  to  Worcester,  both 
in  competition  with  our  line  to  the  Sound,  and  with  the  Providence 
and  Worcester  Road  to  Providence. 

Mr.  Gilbert.  Does  3Tour  line  furnish  a  portion  of  the  coal  at 
Worcester? 

Mr.  Clark.  Yes,  sir. 

Mr.  Gilbert.  Does  not  that  show  that  you  cannot  bring  coal 
by  rail  any  farther  east  than  Worcester  when  }rou  can  compete 
there  by  coal  from  the  Sound  with  the  Boston  and  Alban}''  Road, 
which  has  every  facility  ? 

Mr.  Clark.  No  sir:  it  does  not  settle  that  question.  As  the 
coal  business  is  practically  managed,  parties  who  make  establish¬ 
ments  on  the  line  of  a  road  have  their  coal-yards  so  situated,  that 
they  become,  in  fact,  the  customers  of  that  road ;  and  each  road 


132 


APPENDIX. 


[Apr. 


has  a  business  of  its  own,  which  sometimes  it  may  be  forced  to 
keep  by  a  reduction  on  the  one  side,  or  a  reduction  on  the  other 
side,  growing  out  of  the  rates  established  or  policy  followed  by 
either  one  of  two  competing  corporations.  The  Boston  and  Al¬ 
bany  Road  has  repeatedly  taken  away  customers  of  the  Norwich 
and  Worcester  Road,  which  we  were  forced  to  give  up  to  them 
rather  than  to  do  the  business  at  a  rate  which  we  did  not  feel  we 
could  afford  to  do  it  at ;  hauling  it  sixty  miles,  and  handling  the 
coal  at  Norwich. 

Mr.  Roosevelt.  Is  there  any  coal  that  comes  to  New  England 
direct  from  the  mines  over  any  railroad  ? 

Mr.  Clark.  Not  a  carload,  that  I  know  of.  In  the  north¬ 
west  part  of  Vermont  there  may  be  :  I  am  not  familiar  with  that. 

There  is  one  element  I  would  like  to  add  to  that,  —  that,  with  an 
all-rail  line  direct  from  the  mines,  we  would  find  use  for  an  aver¬ 
age  amount  of  rolling-stock  all  the  year  round.  As  the  business 
is  now  done  by  part  water  and  part  rail,  however,  it  varies  greatly 
in  volume  at  different  seasons  ;  and  consumers  are  subjected  to 
charges  of  demurrage.  At  times  we  have  more  business  than  can 
be  transacted  with  the  equipment  at  our  command,  and  at  other 
times  the  equipment  has  to  lie  idle.  If  we  had  an  average  daily 
amount  to  be  carried  from  the  mines  to  the  consumer,  there  would 
also  be  saving  in  interest  to  the  consumer,  who  has  hitherto  been 
obliged  to  store  up  his  coal  at  certain  seasons  of  the  j'ear ;  and 
the  Railroad  Compan}^  would  be  able  to  use  its  rolling-stock  every 
day  in  the  year.  This  is  in  addition  to  the  element,  alluded  to  by 
Col.  Cannon,  of  fresh-mined  coal,  and  the  cost  of  handling. 

No  Transshipment  of  Western  Freight. 

Mr.  Hart.  I  am  very  glad,  Mr.  Chairman,  that  that  point  has 
been  elaborated.  I  think  it  has  now  been  made  clear.  It  is  a  very 
important  point.  There  is  no  coal  that  comes  into  this  part  of 
New  England  that  is  not  transported  partly  by  water.  By  our 
road,  when  completed,  if  you  will  examine  the  testimon}'  of  those 
gentlemen  who  testified  heretofore  very  much  in  detail  with  re¬ 
gard  to  the  income  to  be  derived  from  this  business  and  its  mag¬ 
nitude,  j^ou  will  find  that  great  stress  is  laid  upon  this  fact,  — that 
the  coal  put  into  the  cars  at  the  mines  is  dumped  into  the  }'ard  of 
the  dealer  ;  and  this  will  be  the  only  road  that  furnishes  it  directly 
from  the  coal-fields.  No  matter  whether  it  is  done  by  a  bridge,  in 
case  the  Poughkeepsie  Bridge  is  completed,  or  bjT  transfer  by  ferry, 
we  have  demonstrated  that  a  transfer  ferry  is  a  very  cheap  and 
expeditious  mode  of  moving  freight. 


1878.] 


APPENDIX. 


138 


Mr.  Wilder.  I  had  not  understood  before,  Mr.  Hart,  —  perhaps 
everybody  else  had,  —  that  the  cars  would  be  transported  across  the 
river.  I  had  supposed  that  there  would  be  a  transshipment,  and 
that  the  coal  would  have  be  handled. 

Mr.  Hart.  No,  sir :  that  is  the  important  point ;  an  important 
characteristic  of  this  road  in  reference  to  this  coal-trade.  It  was 
stated  by  one  of  the  gentlemen  wTho  testified  at  the  last  hearing 
with  regard  to  this  road,  that  it  was  subject  to  competition  by 
water.  He  said  that  every  village  on  the  line  of  the  road,  from 
Waterbury  to  Fishkill,  is  now  supplied  with  water  or  railroad  facili¬ 
ties  ;  and,  so  far  as  additional  facilities  were  concerned,  they  would 
be  better  off  without  than  with  the  proposed  road.  Now,  this  road 
is  not  subject  to  that  competition.  Col.  Cannon’s  boats  that  come 
to  Rondout  go  down  the  Hudson  River,  and  round  to  Norwalk  ;  and 
there  the  coal  is  loaded  into  cars. 

Col.  Cannon.  I  beg  your  pardon.  The  boats  we  start  from  the 
mine  go  no  farther  than  New-York  Cityr :  they  are  canal-boats. 
Those  boats  discharge  at  any  point  on  the  Hudson  River  ;  but  they 
cannot  pass  around  New-York  City  to  be  towed  east.  When  coal 
goes  east  of  New  York,  the  canal-boats  are  unloaded  into 
other  barges  if  destined  to  points  on  Long-Island  Sound.  All  coal 
that  comes  to  Boston  by  w'ater  has  to  be  reshipped  into  sailing- 
vessels  or  steamers. 

Mr.  Hart.  The  boats  that  go  up  into  the  mines  from  Rondout 
do  not  come  round  New  York  into  the  Sound  ;  but  the  coal  is  put 
into  barges  at  Rondout,  and  brought  east  by  water.  The  same 
remarks  apply  also  to  through  freight,  which  goes  up  to  these  local 
points,  —  Danbury,  Waterbury,  and  other  points. 

The  Chairman.  Then  New  England  has  no  experience  in  coal 
being  brought  direct  from  the  mine  without  reshipment,  and  the 
disadvantage  of  the  fares  charged  for  short  haul  ? 

Mr.  Cannon.  There  has  been  one  exception,  and  I  will  state  it. 
Five  or  six  years  ago  there  was  a  winter  of  great  discouragement 
in  New  England,  and  there  was  a  short  supply  of  coal.  That  win¬ 
ter  we  shipped  coal  direct  from  the  mines  by  way  of  Binghamton 
and  Alban}7  away  round  here.  It  was  brought  to  Springfield,  and 
I  don’t  know  but  some  of  it  came  nearly  to  Boston.  That  was  an 
exceptional  year,  a  very  severe  winter,  and  there  was  a  short  sup¬ 
ply  of  coal  laid  in.  I  think,  that  winter,  coal  was  eight  or  nine 
dollars  a  ton,  or  ten  dollars. 

The  Chairman.  That  was  a  circuitous  route. 

Col.  Cannon.  It  came  round  by  Binghamton  and  Albany ; 
w7hereas  we  had  lying  at  Rondout  at  that  very  time  100,000  tons 
of  coal  that  we  had  no  avenue  to  get  out,  being  ice-bound. 


134 


APPENDIX. 


[Apr. 


Mr.  Gilbert.  I  recollect  that  circumstance  very-  well.  I  re¬ 
ceived  coal  direct  from  the  mines  at  points  east  of  Springfield. 

Sinking-Fund  or  Interest  on  Old  Debt. 

* 

The  Chairman.  That  was  receiving  it  very  indirectly.  One  of 
the  objections  raised  at  the  last  hearing  by  one  of  the  members  of 
the  Commission  was,  that,  whatever  sum  the  State  should  advance, 
one-half  of  it,  according  to  its  policy,  would  have  to  go  into  a 
sinking-fund  to  provide  for  the  payment  of  the  debt,  and  so  it 
would  leave  only  a  moiety  to  develop  the  road.  What  answer 
would  you  make  to  that? —  that,  if  four  millions  were  loaned,  two 
millions  would  go  into  a  sinking-fund? 

Mr.  Gilbert.  There  is  no  such  statement  as  that. 

The  Chairman.  I  understood  Mr.  Stone  to  say  that  such  a 
sum  would  be  required.  Am  I  right  in  the  way  I  understood  the 
gentleman  on  the  Commission  ? 

Mr.  Hart.  I  think  you  are  as  to  the  establishment  of  a  sink¬ 
ing-fund. 

Mr.  Clark.  As  to  the  establishment  of  the  sinking-fund,  but 
not  as  to  its  taking  half  of  the  advance. 

Mr.  Hart.  I  think  this  was  on  the  gentleman’s  mind.  The 
State  has  usually,  I  think,  established  a  sinking-fund  looking  to 
the  payment  of  the  debt  when  due.  The  objection  of  the  gentle¬ 
man  was,  that  it  was  establishing  a  bad  precedent  not  to  have  a 
sinking-fund  ;  and  in  one  sense  he  wms  right.  But  we  could  not 
afford,  as  }'ou  will  see,  to  assume  to  pay  the  interest  that  you  pay 
on  the  three  million  six  hundred  thousand,  dollars,  and  also  put 
one  hundred  and  eighty  thousand  dollars,  or  anjT  part  of  it,  every 
year  into  a  sinking-fund. 

The  Chairman.  He  assumed  that  the  loan  to  the  road  would 
be  four  millions.  Do  you.  recollect  the  amount  that  he  stated 
should  be  devoted  to  a  sinking-fund  ? 

Mr.  Clark.  I  think  I  can  refresh  your  recollection.  He  took 
it  for  granted  that  no  loan  would  be  made  without  the  establish¬ 
ment  of  a  sinking-fund.  Another  member  of  the  Joint  Special 
Committee  did  not  think  a  sinking-fund  amounted  to  much.  It 
was  simply  a  subtraction  from  the  original  amount  issued,  kept 
back  by  the  State  in  order  to  pay  the  principal. 

The  case  here  is  equally  well  met,  and  will  suit  the  Corporation 
just  as  well  in  one  case  as  in  the  other.  If  the  State  should  take 
the  ninety  thousand  dollars,  which  we  propose  to  pay  you  every 
six  months,  for  a  sinking-fund,  and  put  it  at  interest,  at  four 
per  cent  per  annum  only,,  it  will  make,  as  you  see  by  the  figures 
presented  b}'  Mr.  Hart,  oVer  six  millions  of  dollars. 


1878.] 


APPENDIX. 


135 


The  gentleman  said  something  should  be  set  apart  for  a  sinking- 
fund  :  he  did  not  fix  any  amount.  You  see  what  the  amount 
should  be  by  the  computation  of  Mr.  Hart.  If  the  amount  of 
ninety  thousand  dollars  should  be  paid  semi-annually,  it  would 
make,  with  interest,  more  than  six  millions  of  dollars  by  the  time 
the  debt  became  due.  You  can  do  as  you  please,  —  either  put  it 
into  a  sinking-fund,  or  use  it  to  pay  your  interest  as  it  accrues. 
Of  course  the  Company  would  prefer  to  have  it  in  a  sinking-fund, 
as  it  would  thus  be  paying  the  Company’s  debt;  but,  if  put  in  a 
sinking-fund,  the  State  would  have  to  continue  paying  the  interest 
on  its  original  investment. 


Loan  paid  in  1900. 

Mr.  Tucker.  Then  you  expect,  at  the  end  of  the  time  for 
which  the  loan  is  made  by  the  State  of  either  four  or  six  millions, 
you  assuming  the  interest  which  the  State  is  How  paying  upon 
their  other  debt,  and  at  the  end  of  the  time  when  this  new  loan 
becomes  due,  there  would  be  four  or  six  millions  due  from  the 
road  to  the  State  :  would  there  not  ? 

Mr.  Clark.  We  should  be  obliged  to  pa}7  our  own  debt  when 
it  became  due,  and  pay  the  one  hundred  and  eighty  thousand 
dollars  a  year  in  addition.  Paying  eight  per  cent  interest  has 
nothing  to  do  with  the  payment  of  the  principal.  The  security 
will  certainly  be  better  when  the  debt  becomes  due  than  it  is 
to-day ;  for  the  road  will  then  have  demonstrated  its  earning 
capacity. 

Mr.  Tucker.  You  think  there  wrould  be  no  difficulty  in  nego¬ 
tiating  a  new  loan? 

Mr.  Clark.  Not  the  slightest. 

Q.  What  interest  do  the  underlying  mortgages  bear? 

Mr.  Clark.  The  Hartford,  Providence,  and  Fishkill  bears 
seven  per  cent ;  some  of  the  others,  six.  There  are  only  about 
four  hundred  thousand  dollars  of  principal  outstanding  other  than 
the  Fishkill. 

Mr.  Cannon.  As  a  bondholder,  I  had  very  much  rather  the 
State  wrould  make  this  a  sinking-fund,  the  one  hundred  and  eighty 
thousand  dollars  a  year  which  the  Company  is  to  pay,  than  have 
the  State’s  stock  a  preferred  stock.  I  think  you  will  see  that  our 
interests  in  that  respect  are  very  clear.  As  a  guaranty  for  the 
old  matter,  if  we  can  pay  that  one  hundred  and  eighty  thousand 
dollars  a  year,  I  don’t  know  that  you  will  want  any  sinking  fund 
for  the  balance  of  the  debt ;  for  we  shall  have  shown  our  ability  to 
pay  it :  but,  if  the  Legislature  would  prefer  to  put  our  payment  in 
a  sinking-fund,  we  are  perfectly  willing. 


136 


APPENDIX. 


[Apr. 


Mr.  Tucker.  You  have  been  obliged  to  use  the  income  of  the 
present  road  to  supply  additional  facilities  ;  and,  although  you 
have  a  nominal  surplus  of  one  hundred  and  eighty-four  thousand 
dollars,  3*011  have  no  real  surplus.  Is  it  fair  to  use  that  sum  to 
calculate  upon  as  money  that  can  be  used  hereafter  to  pay  the 
interest  money?  How  is  that? 

Mr.  Clark.  I  think,  Mr.  Chairman,  that  question  was  in  a 
large  part  answered  by  the  remarks  I  made  in  opening.  The  work 
that  has  been  done  is  very  much  more  in  amount  and  extent  than 
the  work  that  remains  to  be  done,  keeping  the  road  as  a  single- 
track  road.  If  the  requirements  of  the  business  require  the 
expenditure  of  a  larger  amount  of  money  for  a  double  track, 
that  business  will  3’ield  its  own  income,  which  will  make  it  possi¬ 
ble  for  the  Company  to  make  the  necessary  improvements  and 
extensions.  If  the  business  is  not  sufficiently  profitable,  if  it 
does  not  do  business  enough  to  justify  any  further  expenditures 
in  that  direction,  then  a  single-track  road  can  be  maintained  in 
its  present  condition.  Since  it  passed  into  the  hands  of  the  cred¬ 
itors,  everj*  rail  and  almost  ever}*  tie  in  the  road  has  been  re¬ 
newed  ;  and  this  is  the  point  which  is  most  difficult  to  bring  to  the 
minds  of  the  gentlemen  trying  to  form  a  correct  judgment  on  a 
matter  of  this  sort.  It  is  a  thing  that  cannot  be  demonstrated  ; 
but,  if  }*ou  could  have  gone  over  the  road  with  me  on  the  first  trip 
that  the  Receivers  made  after  they  came  into  possession  of  the 
propert}*  in  1870,  it  would  have  made  such  an  impression  upon 
3*011,  that  }*ou  could  not  have  forgotten  it  to  this  da}*. 

The  road  is  in  as  good  order  as  roads  will  average.  I  do  not 
claim  that  it  is  a  perfect  road,  but  that  it  is  a  first-class  single- 
track  road. 


Money  for  Future  Wants. 

Col.  Cannon.  It  is  proposed  that  the  road  should  be  taxed  in 
a  way  of  interest  and  on  this  proposed  debt  to  the  extent  ol 
$480,000,  and  that  the  Commonwealth  receive  a  first  mortgage  ot 
six  millions  of  dollars.  That  is  all  the  encumbrance  upon  the 
property :  that  is  a  first  mortgage.  There  cannot  be  a  doubt,  I 
think,  in  anybody’s  mind,  that  if  we  can  get  money  enough  to 
build  this  road  through  to  the  Hudson  River,  and  discharge  all  its 
obligations,  —  both  of  which  things  the  six  millions  will  do,  —  that 
we-  shall  have  good  credit  enough  by  a  second  mortgage  to  get  any 
amount  of  rolling-stock  we  may  want,  entirely  independent  of  our 
earnings  :  not  the  slightest.  I  should  be  very  glad  to  take  some 
second-mortgage  bonds  if  this  road  is  completed.  They  can  get 
all  the  money  they  want. 


1878.] 


APPENDIX. 


187 


Let  us  see  what  there  is  upon  the  road.  Three  hundred  and 
forty-five  miles  of  road,  with  six  millions  of  debt  on  it.  Only 
about  seventeen  thousand  dollars  a  mile  on  a  completed  road. 

Therefore  I  feel  very  certain,  and  I  think  any  one  who  examines 
this  matter  will  be,  that  this  road  completed  through  would  be  a 
great  avenue  to  bring  coal  to  all  points  that  are  not  directly  on  the 
water.  Our  Company  does  not  assume  to  compete  with  water, 
wherever  the  navigation  is  open  the  3rear  round ;  but,  where  the 
navigation  is  interrupted  a  portion  of  the  year,  we  have  a  coal  busi¬ 
ness. 

I  speak  of  this  as  evidence  to  my  own  mind,  and  I  hope  it  may. 
be  clear  to  you,  that  the  proposition  of  this  Company,  as  made  to 
your  Committee,  is  one  that  it  can  well  perform  and  carry  out.  It 
is  a  good  bargain,  both  for  the  Corporation  and  the  State.  It  is 
certainly  an  excellent  one  for  the  State,  provided  the  interest  upon 
this  loan  will  be  met ;  for  it  will  be  an  absolute  saving  to  the  State 
of  four  millions  of  dollars.  Personalty,  I  confess  I  have  been 
repeatedly  embarrassed  :  I  have  felt  in  New  York  that  I  realty  had 
no  business  to  remain  in  this  Corporation,  where  the  State  of 
Massachusetts  had  so  large  an  interest,  and  seemed  to  be  insensible 
to  the  protection  of  that  interest,  because  we  had  no  right  to  be 
viewed  in  this  matter  as  any  thing  more  than  speculators.  We 
held  this  stock  because  we  expected  to  make  money  out  of  it. 

Less  Debt  and  Less  Capital  than  any  Other  New-England 

Load. 

With  this  road  completed,  provided  we  get  this  loan,  it  will  cer¬ 
tainty  exhibit  a  length  of  railway  line,  with  less  debt  and  less 
capital,  than  any  thing  to  be  found  in  this  country,  or  certainty  in 
the  New-England  States ;  for  I  am  not  prepared  to  assume  that 
these  Berdell  bonds  are  worth  $20,000,000,  or  $10,000,000. 

This  road  completed  would  be  345  miles  long,  and  would  have 
a  personal  property  worth  not  less  to-day  than  $1,500,000,  and 
with  a  debt  of  only  $0,000,000,  and  with  the  present  earnings  of 
$2,000,000  a  }rear.  I  think  no  man  at  all  familiar  with  the  history 
of  roads,  with  a  population  as  large  as  that  tributary  to  this  line, 
and  not  onty  a  large  population,  but  a  manufacturing  community, 
—  I  think  no  man  could  look  at  it  without  being  satisfied  that  this 
Corporation,  managed  intelligently  and  with  integrity,  —  which  is 
one  of  the  hazards  nowada3Ts  of  all  corporations,  —  I  think  there 
can  be  no  doubt  that  we  can  readity  meet  the  interest  account  upon 
all  obligations  that  this  Company  would  assume. 

In  regard  to  this  matter  of  through  and  local  business,  which 


138 


APPENDIX. 


[Apr. 


has  been  referred  to  by  objectors,  I  think  that  was  very  clearly 
and  cleverly  treated  by  the  General  Manager.  It  may,  however, 
be  proper  to  add,  that  the  only  possible  way  to  do  local  business 
well  is  to  have  a  thorough  business.  It  cannot  be  done  an}T  other 
way.  Local  business  can  be  carried  a  great  deal  less,  —  without 
saying  how  much  less,  —  for  a  great  deal  less  monej’,  if  the  road 
has  a  through  business  as  well  as  a  local.  For  one  thing,  the  roll¬ 
ing-stock  can  be  used  to  so  much  greater  advantage.  We  found 
we  can  get  about  as  much  out  of  a  car  on  a  train  that  travels  two 
hundred  and  forty  miles  as  we  can  out  of  one  that  travels  fifty 
miles.  The  great  loss  is  at  the  terminal  points,  in  loading  any 
discharging.  The  through  freight  always  goes  along :  the  local 
freight  has  to  stop  at  every  station  to  take  on  or  to  drop  cars. 
The  onty  possible  way  to  get  a  cheap  rate  for  local  is  to  have 
abundant  through  freight. 

Q.  Did  this  six  million  contemplate  the  laying  of  a  double 
track  ? 


A  Double-Track  Road. 

Mr.  Clark.  No,  sir.  I  will  state  for  the  information  of  the 
Committee,  that,  on  a  large  part  of  the  road,  the  cuttings,  embank¬ 
ments,  and  masonr}7,  particularly  on  the  new  parts  of  the  road, 
have  been  built,  and  are  substantially  completed,  for  a  double-track 
road.  Expenditures  for  this  is  one  of  the  things  that  embarrassed 
the  Boston,  Hartford,  and  Erie  Railroad  Company  in  1868.  You 
would  be  surprised  if  you  could  go  over  the  unfinished  portion  of 
the  road  west  of  Waterbury,  and  see  the  scale  on  which  they  spent 
their  money  there.  Three  millions  of  dollars  are  lying  out  there 
lost,  unless  something  is  done  ;  yielding  not  one  single  cent  of  reve¬ 
nue,  but  calling  upon  us  every  little  while  for  a  new  highway-bridge, 
or  some  assessment  of  taxes  for  school-purposes,  or  fire-purposes, 
or  city  or  town  purposes,  all  of  which  we  have  to  meet  from  the 
revenues  of  one  hundred  and  thirty-nine  miles  of  road  we  operate. 

Mr.  Gilbert.  Is  that  portion  of  the  road  built  for  a  double 
track  ? 

Mr.  Clark.  Yes,  sir. 

Mr.  Gilbert.  What  is  the  distance? 

Mr.  Clark.  About  seventy  miles. 

Mr.  Gilbert.  How  much  of  the  road  is  built  for  a  double 
track  ? 

Mr.  Clark.  Substantially  the  whole  of  the  new  part.  There 
are  different  characteristics  growing  out  of  the  time  it  was  con¬ 
structed.  That  portion  built  by  the  Boston,  Hartford,  and  Erie 


1878.] 


APPENDIX. 


189 


Railroad  Company,  which  includes  the  portion  between  Putnam 
and  Willimantic  and  the  road  from  Waterbury  to  the  Hudson, 
are  built  upon  a  scale  of  most  extraordinary  expenditure.  The 
old  portion  of  the  road,  known  formerly  as  the  Norfolk-County 
vRailroad,  shows  a  very  different  style  of  work.  It  is  built  for 
a  single  track  ;  and  the  masonry  was  built  for  engines  and  equip¬ 
ment  which  in  those  day's  was  considered  ample, — engines  weigh¬ 
ing  from  twelve  to  fiteen  tons,  instead  of  forty. 

Q.  Which  part  of  the  road  is  that? 

Mr.  Clark.  The  part  nearest  Boston.  The  worst  part  is  the 
part  that  gentlemen  are  most  likely  to  see.  It  improves  steadily 
as  you  go  toward  the  western  end.  It  is  built  on  a  much  more 
expensive  scale  at  the  western  end.  The  part  between  Putnam 
and  Willimantic  has  been  graded:  not  only  is  the  masonry  there, 
but  it  had  been  substantially  graded  for  a  double  track  for  that 
twenty-five  miles,  at  a  cost  of  about  a  hundred  thousand  dollars 
a  mile  in  cash.  It  cost  $2,400,000,  and  the  distance  is  about 
twenty-five  miles. 

Mr.  Wilder.  That  statement  would  not  necessarily  question 
the  judgment  of  the  managers  of  the  road  at  that  time,  they  hav¬ 
ing  stated  that  it  was  built  for  a  purely  local  road? 

Mr.  Clark.  Mr.  Bird  said,  that,  in  the  origin,  the  old  Norfolk- 
County  Road  was  built  for  a  local  road.  When  the  Boston,  Hart¬ 
ford,  and  Erie  Railroad  Compaq’  was  incorporated  in  1863,  it  was 
a  corporation  formed  originally'  to  bu3T  up  and  absorb  some  four  or 
five  different  roads,  which  were  originally  constructed  for  local 
roads,  and  consolidate  them  in  one  grand  through  line.  That  is 
the  exact  history  of  the  New- York  Central  Road :  it  is  a  road 
formed  by  the  combination  of  a  great  many  little  roads  which  had 
been  originally'  constructed  by  the  communities  interested  for  local 
purposes.  Of  course,  a  large  expenditure  has  been  made  upon 
them  to  make  it  a  through  line. 

Mr.  Wilder.  Mr.  Bird  was  asked  near  the  close  of  his  testi¬ 
mony,  “You  know  the  history'  of  this  road  from  the  beginning; 
what  was  the  purpose  of  it?  ”  and  he  replied,  u  It  was  originally 
chartered  as  a  local  road  from  Blackstone  to  Boston.”  He  say's 
it  was  originally  chartered  as  a  local  road. 

Mr.  Clark.  As  I  said,  that  was  the  Norfolk-County  Road. 
That  was  built  as  a  local  road.  We  have  been  engaged  for  seven 
or  eight  y'ears  in  rebuilding  the  abutments,  culverts,  &c.,  on  this 
part  of  the  line. 

Q.  You  don’t  need  a  double  track  between  Putnam  and  Wil¬ 
limantic  to  do  the  local  business  there  is  there? 


140 


APPENDIX. 


[Apr. 


Mr.  Clark.  Not  at  all.  We  have  been  trying  to  develop  a 
milk  business  from  that  part  of  the  road,  the  country  being  a  fine 
farming  region. 

The  only  Practicable  Line  via  Hartford  West. 

Mr.  Tucker.  There  seems  to  be  on  this  railroad  map  a  line 
running  to  Millerton  and  Canaan,  and  also  a  line  going  down  to 
Poughkeepsie  in  the  same  direction,  making  a  line  from  Pough¬ 
keepsie  to  Hartford.  Why  does  not  that  give  an  outlet  for  this 
coal?  And,  if  a  road  exists,  what  is  the  necessity  for  building 
a  new  road  ? 

Mr.  Clark.  That  wras  a  line  that  it  was  proposed  to  use  to 
meet  our  desire  to  serve  our  local  interests  by  opening  direct  con¬ 
nection  to  the  West.  It  happened  in  this  way  :  The  Erie  Road  was 
desirous  of  making  an  all-rail  line  into  New  England,  and  we  dis¬ 
cussed  this  route  at  length.  In  that  line,  the  first  road,  beginning 
at  the  river,  was  the  Dutchess  and  Columbia  Road  ;  the  next  was 
the  Connecticut  Western  ;  and  the  next  in  the  route  was  the  Hart¬ 
ford,  Providence,  and  Fishkill  Railroad  ;  and  lastly  our  own  road. 
Upon  the  principle  I  have  announced  to  you  as  to  the  division  of 
all  through  earnings,  while  the  Erie  Railway  was  willing  to  give  us 
east  of  Fishkill  a  larger  amount  per  car  than  the  Boston  and  Al¬ 
bany  Road  gets  for  freight  east  of  Albany,  if  any  part  of  the  freight 
should  stop  five  miles  this  side  of  Fishkill,  the  Dutchess  and  Co¬ 
lumbia  Road  would  and  did  claim  the  entire  New-England  division 
to  itself. 

If  it  passed  from  that  road,  and  went  to  a  local  point  on  the  Con¬ 
necticut  Western,  it  was  willing  to  share  the  New-England  divis¬ 
ion  with  the  Connecticut  Western  Road  ;  but  nothing  east  of  that 
road  got  anj-  thing  out  of  it. 

If  it  came  east  of  Hartford,  on  to  the  Hartford,  Providence,  and 
Fishkill  Road,  the  two  roads  over  which  it  had  passed,  and  the  lat¬ 
ter  road,  would  absorb  all  the  New-England  division  on  that  freight ; 
while,  if  it  came  on  to  our  road  to  come  through  to  Boston,  they 
were  all  willing  to  divide  the  New-England  division  with  us. 

With  four  separate  corporations  between  Boston  and  the  Hudson 
River,  I  expressed  the  situation  at  one  of  our  conferences  in  this 
way :  The  Dutchess  and  Columbia  Road  got  all  the  fat ;  the  Con¬ 
necticut  Western  got  a  streak  of  fat  and  a  streak  of  lean  ;  the  Hart¬ 
ford,  Providence,  and  Fishkill  got  all  the  lean  ;  and  the  New-York 
and  New-England  Road  got  onl}r  the  gristle,  and  we  could  not  af¬ 
ford  it. 

Mr.  Tucker.  If  this  line  from  Hartford  to  the  Hudson  River 


1878.] 


APPENDIX. 


141 


has  not  been  able  to  get  enough  trade  to  prevent  it  from  becoming 
bankrupt,  what  reason  is  there  for  believing,  that,  with  your  road 
completed  to  Fishkill,  you  will  do  a  good  business? 

Mr.  Clark.  Upon  this  same  principle  which  I  should  be  very 
glad  to  state  to  the  Committee.  The  Erie  Railway  to-day  is  send¬ 
ing  to  Boston  b}'  our  Norwich  line,  to  and  from  Boston  and  points 
reached  by  our  lines  which  are  competitive,  its  high-class  freight,  and 
pa}ing  us  about  twent}’  per  cent  more  than  it  could  reach  Boston 
by  one  of  our  competing  Sound  lines.  We  are  doing  this  business, 
and  we  get  twenty  per  cent  more  for  doing  it  than  our  competitor 
would  have  done  it  for.  You  may  ask  why  they  gave  it  to  us.  It 
is  because  our  road,  with  its  varied  connections,  could  give  them 
outlets  into  and  out  of  Providence,  Boston,  Norwich,  New  London, 
Worcester,  Blackstone,  Willimantic,  Walpole,  and  Boston,  which 
are  all  competing  points,  while  our  competitor  reached  only  two  of 
these  points.  If  you  can  make  a  single  contract  with  a  corporation 
to  put  you  wherever  }tou  want  to  go,  it  will  give  them  a  volume  of 
business  ;  and  it  is  a  greater  object  for  them  than  if  }rou  could  give 
them  access  to  but  a  single  point. 

Those  roads  disconnected  and  disjointed,  without  a  head,  were 
unable  to  make  any  arrangement  with  the  Erie  Railway  which 
would  make  them  what  could  be  considered  in  any  sense  a  through 
line.  I  think  that  answers  the  question. 

Mr.  Hart.  Mr.  Roosevelt’s  summer  residence  is  in  the  imme¬ 
diate  neighborhood  of  the  Dutchess  and  Columbia  Road  and  Pough¬ 
keepsie  and  Eastern  Roads,  and  he  may  be  able  to  give  the  Com¬ 
mittee  some  information  in  regard  to  those  roads. 

Mr.  Roosevelt.  Both  roads  are  badly  constructed,  badty  built, 
have  short  curves,  heavy  grades,  and  light  rails. 

Mr.  Tucker.  Are  those  grades  and  curves  such  as  to  prevent 
their  doing  business,  if  there  was  any  to  be  done? 

Mr.  Roosevelt.  Yes,  sir:  any  large  amount  of  business  at 
reasonable  rates.  They  have  as  yet  no  connections  for  through 
business.  They  were  not  built  originally  to  accommodate  through 
business. 

Mr.  Tucker.  Our  query  was,  If  there  was  a  large  amount  of 
through  business  to  be  done  there,  why  thejT  did  not  do  it? 

Mr.  Roosevelt.  They  have  no  connections,  and  no  credit  at 
present  to  make  connections  with. 

Mr.  Tucker.  If  they  could  be  brought  together,  and  should 
connect  with  this  road  at  Hartford,  the  line  that  way  to  Pough¬ 
keepsie  would  not  be  much  longer  or  harder  than  the  proposed 
route  through  Waterbury  that  is  not  built. 


142 


APPENDIX. 


[Apr. 


Mr.  Clark.  It  would  be  much  harder.  Our  grades  nowhere 
exceed  sixty  feet  to  the  mile,  and  our  train  load  is  two  hundred 
tons,  —  say  twenty  carloads,  —  with  which  we  can  run  over  the  road 
with  an  ordinaiy  single  engine.  I  think  the  maximum  load  on  the 
Connecticut  Western  is  about  six  cars.  We  can  do  business  where 
they  would  starve. 

Q.  What  is  the  comparative  distance? 

Mr.  Clark.  The  distance  is  the  same,  within  a  few  miles. 

Q.  Their  grades  are  worse? 

Mr.  Clark.  Immensely:  very  much  worse.  But,  to  begin  to 
do  business,  the  impossibility  of  forming  a  through  line  is  the  one 
I  spoke  of. 

Q.  If  that  difficulty  could  be  met  by  a  consolidation  of  the 
roads  ? 

Mr.  Clark.  It  would  be  better  to  take  what  money  is  necessar}', 
and  complete  this  road,  which,  when  finished,  is  a  better  road,  than 
to  expend  it  in  getting  those  gentlemen  who  are  unfortunately 
situated  out  of  their  dilemma. 

Q.  Would  not  this  be  the  fact,  if  that  road  was  running  to  the 
Hudson?  The  business  from  that  end  of  the  road  would  come 
over  this  end  of  the  road ;  and  the  through  business  would  also 
pass  over  that  end  of  the  road,  which  would  make  it  a  profitable 
portion  of  the  road. 

Mr.  Clark.  As  to-  the  local  business,  we  do  that  now.  We 
exchange  local  business  for  local  points  with  their  road  :  with  the 
present  facilities  for  transfer,  we  send  as  much  as  we  can.  The 
part  of  the  New- York  and  New-England  Road  that  we  operate, 
however,  does  not  get  the  benefit  of  that,  as  the  Hartford,  Provi¬ 
dence,  and  Fishkill  Road  takes  it  to  Providence,  and  sends  it  over 
the  Boston  and  Providence  Road  to  Boston.  Of  course,  if  there 
was  an}'  business  to  come  through,  we  should  be  ver}'  glad  to  take 
it.  But  the  objections,  I  may  say  the  impossibility,  of  forming 
an  efficient  through  line  with  them,  is  fundamental,  and  can  never 
be  avoided.  1  should  like  to  sa}'  to  the  Committee,  in  addition, 
that  there  is  still  another  road  running  from  the  river  at  Rhine- 
beck  ;  and  over  that  road  from  Rhinebeck  (which  is  opposite  Ron- 
dout,  at  the  end  of  the  Delaware  and  Hudson  Compan3,,s  Canal), 
coal  is  brought  successfully  to  points  east  of  Hartford,  but  in 
limited  quantities 

Q.  Why  not  in  large  quantities? 

Mr.  Clark.  The}^  cannot  afford  to  do  it,  on  account  of  the 
grades  on  the  Connecticut  Western. 

Mr.  Roosevelt.  They  connect  with  the  Delaware  and  Hudson 
Canal  Company  at  Rhinebeck. 


1878.] 


APPENDIX. 


148 


Q.  What  are  these  railroads  that  go  west  from  Rondout  ? 

Mr.  Roosevelt.  There  is  a  railroad  that  runs  up  into  the  moun¬ 
tains,  and  the  canal  of  the  Delaware  and  Hudson  Canal  Company 
comes  out  into  the  river  at  that  point.  The  railroad  connects  with 
the  New- York  Central  somewhere. 

Q.  What  is  the  Hudson-river  terminus  of  the  Erie  Railway? 

Mr.  Hart.  Newburg,  opposite  Fishkill.  The  Erie  Road  is  built 
to  Newburg. 

New  All-Rail  Line  to  New  York. 

Mr.  Cannon.  I  think  perhaps  another  fact  sometimes  over¬ 
looked  is,  that  this  road  will  intersect  the  Harlem  Road  at  Brew¬ 
sters  ;  and,  by  making  connection  with  that  road,  we  can  make  a 
line  to  New  York,  which  is  precisely  the  same  distance  between 
Boston  and  New  York  as  the  line  b}*-  way  of  Springfield.  By  com¬ 
pleting  this  road  to  Brewsters,  we  could  open  a  new  route  to 
New  York.  That  could  be  done  at  small  expense. 

The  Chairman.  Is  there  any  thing  further? 

Mr.  Hart.  There  is  nothing  that  occurs  to  me.  We  have 
stated  all  the  points  which  occur  to  us  as  being  important.  The 
State  of  Massachusetts,  I  think,  has  never  lost  an}’  money  in  con¬ 
sequence  of  its  loan  to  railroads  up  to  this  time.  I  believe  that 
they  have  alwa}’s  been  repaid,  except  the  Tunnel  loan.  Of  course, 
there  is  an  amount  invested  there  which  it  can  hardly  expect  to 
recover. 

We  of  the  management  have  thought  the  State  could  save  itself 
from  further  loss  in  consequence  of  its  loan  to  the  Boston,  Hartford, 
and  Erie  Compairy ;  the  onty  other  bad  one,  to  speak  plainly  about 
it.  We  are  not  responsible  for  its  having  been  made  ;  but  we  pre¬ 
sent  this  way  of  getting  out  of  it. 

We  needed  the  mone}’,  as  we  felt  that  it  was  important  that  we 
should  take  up  the  undertying  liens,  and  complete  our  road.  We 
cast  about,  and  said,  “  How  shall  we  get  it?”  I  remember  very 
distinctty,  at  a  stockholders’  meeting  held  a  }’ear  ago,  Col.  Cannon, 
who  was  present,  stated  the  importance  of  raising  this  money  ;  and 
he  said  he  would  be  one  of  thirty  to  furnish  six  millions  of  dollars. 
I  think  we  should  have  found  half  a  dozen  present  at  that  meeting 
who  would  have  done  the  same  thing,  and  furnished  two  hundred 
thousand  dollars  apiece,  such  was  their  confidence. 

You  understand  perfectly  well,  that  if  a  syndicate  were  going 
to  take  these  bonds,  and  furnish  this  money,  it  would  want  them 
at  as  low  a  price  as  it  could  get  them,  and  that  would  remove 
so  much  farther  away  the  value  of  the  stock. 


144 


APPENDIX. 


[Apr. 


The  State  Benefited  by  the  Loan. 

We  said  to  ourselves,  “We  ought  to  go  to  the  State  and  offer 
the  Commonwealth  this  opportunity  of  making  good  their  invest¬ 
ment  in  the  property,  which  we  may7  do  with  no  loss  to  ourselves. 
Until  we  have  done  that,  why  should  we  talk  about  it  among  our¬ 
selves?”  We  concluded  that  we  ought  to  do  it;  that  it  was  our 
duty  to  do  it.  I  should  not  have  felt  that  we  were  discharging  our 
duty  if  we  did  not  bring  to  your  consideration  this  plan.  It  is 
simply  giving  to  the  State  what  we  save  by  getting  cheap  money,  — 
money  at  a  low  rate  of  interest,  as  y7ou  will  see,  if  y-ou  will  look 
at  the  results  in  figures.  They  are  startling  in  the  amount  of 
saving  which  they  show.  We  can  save  to  the  State,  even  at  the 
low  rate  of  four  per  cent  per  annum,  six  millions  and  a  quarter 
of  dollars,  and  still  make  money-  by  it  ourselves. 

It  is  a  proposition  which  we  submit  for  your  consideration. 

It  is  a  business  question,  entirety  disconnected  from  politics  ;  and 
this  a  simple  conference  among  ourselves  as  to  the  best  plan  for  de¬ 
veloping  this  great  enterprise,  and  saving  the  State  from  further  loss. 

While  I  do  not  go  to  the  extent  in  m37  expectation  of  the  origi¬ 
nal  projectors  of  this  enterprise,  I  do  think  there  is  a  great  deal 
in  it. 

It  is  proper,  perhaps,  that  I  should  note  an  objection  that  was 
made  b37  one  of  the  gentlemen,  that  a  large  part  of  this  expendi¬ 
ture  is  in  another  State.  That  is  true  ;  but  we  cannot  help  it  now. 
The  responsibility  for  that  rests  with  those  who  voted  for  it  at  the 
time.  The37  did  not  think  it  wrong  to  vote  three  millions  and 
a  half  of  dollars  to  invest  west  of  a  road  that  the37  *had  not  got 
possession  of,  and  the37  did  it.  We  find  a  portion  of  the  security 
for  a  new  loan  is  out  there.  The  security-,  however,  we  think, 
is  sure.  I  should,  perhaps,  say-,  in  justice  to  all  the  other  States 
in  which  our  property  lies,  that  the3r  have  never  failed  in  a  single 
instance  to  pass  corresponding  acts  to  those  which  we  have  found 
necessary  to  pass  by-  this  Legislature.  They  have  followed  in  their 
legislation  the  action  of  the  Legislature  of  Massachusetts,  and 
their  courts  have  passed  the  same  decrees  as  the  courts  of  this 
Commonwealth. 

In  no  single  instance  have  we  been  defeated  in  a  lawsuit  affect¬ 
ing  our  title.  Mr.  Dillon,  who  had  the  contract  for  the  construc¬ 
tion  of  the  road  west  of  Waterbury,  had  a  claim  against  the 
old  Company-  of  a  million  of  dollars.  It  may  surprise  you  that  he 
continued  work  without  having  received  the  money7 :  he  put 
$3,200,000  in  cash  in  the  work.  But  there  was  pending  in  this 


1878.] 


APPENDIX. 


145 


Legislature  in  1870  an  application  for  State  aid,  with  a  prospect  of 
success  ;  and  he  was  encouraged  to  keep  his  men  at  work.  Mind 
you,  it  was  within  six  months  of  completion  at  the  time  he  ceased 
work.  There  is  not  a  quarter  of  a  mile  of  road  on  which  work 
has  not  been  done.  It  was  all  underlet,  and  in  the  process  of  con¬ 
struction.  But  with  all  that  expenditure  we  have  nothing  to  do. 
We  want  to  see  it  finished.  We  want  to  get  to  the  Hudson  River. 
I  think  there  is  a  contract  between  the  Erie  Railway  Company  and 
the  Delaware  and  Hudson  Canal  Company,  by  which  the  Delaware 
and  Hudson  Canal  Company  have  the  right  to  transport  their  coal, 
not  only  on  the  Erie  Road,  but  on  their  connections  over  other 
roads. 

Mr.  Cannon.  Yes,  sir :  that  is  so.  It  is  a  contract  for  all  time. 
It  is  what  the}7  call  a  traffic  contract,  —  one  that  is  a  good  one  for 
these  roads  to  go  into.  The  coal  at  the  mine  is  valued  at  the  cost 
price  ;  then  the  railways  transport  it  at  a  minimum  price,  at  what 
they  assume  to  be  cost ;  then  whatever  the  coal  sells  for  is  divided 
with  the  coal  company  and  the  railway  company  pro  rata ,  accord¬ 
ing  to  the  length  of  the  haul.  So  that  they  all  have  an  object  in 
transporting  it  for  the  lowest  price,  and  in  getting  the  highest  price 
for  the  coal. 

Mr.  Hart.  Mr.  Dillon’s  suit  was  conducted  by  eminent  coun¬ 
sel,  and  he  was  advised  that  he  had  a  prior  claim  to  the  Berdell 
mortgage.  Mr.  Bartlett  so  advised  him,  and  carried  his  case  to 
Washington  ;  but  he  lost  it.  That,  of  course,  settled  the  claim  of 
Mr.  Munson,  who  had  a  similar  contract  to  build  the  road  from 
Putnam  to  Willimantic  ;  and  there  was  due  him  about  seven  hun¬ 
dred  thousand  dollars.  Both  claims  against  the  road  were  thus 
adjudged  invalid  as  against  the  Berdell  mortgage. 

We  hope  the  Committee  will  see  the  interests  of  the  State  as  we 
see  them,  and  furnish  the  means  for  carrying  out  this  work.  The 
details  as  to  how  the  State  can  be  made  a  preferred  creditor  can 
be  worked  out  in  a  bill.  You  understand  that  now  we  are  author¬ 
ized  to  mortgage  the  road  for  ten  millions  of  dollars,  and  that  the 
bonds  secured  by  this  mortgage  are  substantially  unissued. 

The  Legislature,  if  it  sees  fit  to  negotiate  with  us  for  a  loan,  can 
treat  them  as  all  in  our  hands  ;  and  I  have  no  doubt  we  can  save 
the  State  from  any  loss.  And  if  any  legislation  is  necessaiy,  any 
concurrent  legislation  in  the  other  States,  I  have  no  doubt  it  could 
be  obtained  at  the  present  time  in  Connecticut,  Rhode  Island,  or 
New  York ;  for,  as  I  said  before,  we  have  alwa}’s  found  them 
favorably  disposed  and  ready  to  confirm  every  thing  tending  to 
make  this  a  success.  Of  course,  we  can  see  that  Connecticut 


APPENDIX. 


146 


[Apr.  ’78. 


would  congratulate  itself  on  having  the  road  completed,  and 
through  connections  made  with  the  West  for  its  citizens. 

Q.  You  say,  in  your  Report  of  last  year,  that  the  road  can  be 
completed  for  three  millions.  Now  you  say  it  can  be  completed 
for  two  millions. 

Mr.  Hart.  We  have  had  a  careful  examination  made,  and  two 
millions  is  a  large  allowance  for  completing  the  unfinished  por¬ 
tion  of  the  road.  The  estimates  of  the  engineer  who  has  been 
over  the  road  includes  every  thing,  —  stations,  engine-houses, 
shops,  steel  rails,  and  every  thing  of  the  sort. 

It  does  not  seem  to  me  that  there  will  be  anybody  who  will 
have  doubts  as  to  whether  a  mortgage  of  six  millions  on  this  com¬ 
pleted  road  will  be  perfectly  secured. 

Mr.  Tucker.  Some  of  us  have  noticed  in  the  Railroad  Com¬ 
missioners’  Report  (House  Document  No.  325,  p.  8)  that  they 
speak  of  an  inspection  of  this  road  by  Mr.  Winslow,  formerly 
Superintendent  of  the  Boston  and  Lowell  Railroad,  and  think  that 
perhaps  he  could  give  us  some  light  as  to  the  present  condition  of 
the  property,  rolling-stock,  &c.,  and  the  probable  necessity  for 
further  expenditures  from  year  to  year  hereafter.  He  is  a  disin¬ 
terested  part}7. 

Mr.  Hart.  That  was  the  reason  why  the  Railroad  Commission¬ 
ers  took  him  as  an  expert.  They  felt  that  the  subject  of  the  value 
of  the  property  was  committed  to  them  ;  and  so  thoroughly  did 
they  go  into  it,  that  they  took  an  account  of  ever}7  shovel  and  every 
pickaxe,  every  pound  of  coal,  and  every  pound  of  iron,  and  counted 
the  chairs  in  the  stations :  they  did  their  work  thoroughly.  Mr. 
Winslow,  being  an  expert  in  railroad-matters,  was  consulted,  and 
made  a  personal  examination  of  the  whole  property. 

It  is  very  fortunate  for  the  Committee  that  they  have  the  Special 
Report  of  the  Railroad  Commissioners  (House  Document  325  of 
1877),  which  will  best  aid  them  in  coming  to  any  conclusion  in 
regard  to  this  matter. 

Adjourned. 


SUPPLEMENTARY  STATEMENT  BY  THE 
RAILROAD  COMPANY. 


SUPPLEMENTARY  STATEMENT  BY  THE 


RAILROAD  COMPANY. 


We  desire  also  to  call  }rour  attention  to  some  topics  not  ade¬ 
quately  developed  in  the  hearing  before  the  committee. 

1.  B37  the  special  report  of  the  railroad  commissioners  made  in 
April,  1877  (House  Document  No.  325,  1877,  p.  18),  the  total 
property  and  assets  of  the  New-York  and  New-England,  and 
Hartford,  Providence,  and  Fishkill  Railroads,  over  and  above  their 
liabilities ,  are  estimated  at  $7,526,183.89. 

In  making  up  this  valuation,  the  completed  sections  of  the  road 
were  appraised  at  $36,000  per  mile ;  and  the  unfinished  section 
between  Waterbury  and  Hopewell  Junction,  at  $11,000  per  mile. 
It  has  been  objected  that  the  commissioners  speak  of  these  figures 
as  an  arbitrary  valuation  ;  and  from  the  nature  of  the  case  it  must 
have  been  arbitrar}7  in  the  true  signification  of  that  word,  viz., 
discretionary,  and  not  depending  on  fixed  rates.  But  it  b}T  no 
means  follows  that  the  estimate  is  not  a  fair  and  just  statement  of 
the  true  value  of  the  company’s  property.  It  was  the  duty  and 
manifest  intention  of  the  commissioners  to  use  their  best  judgment 
and  discretion  ;  and  there  is  every  reason  to  believe  that  they  did 
so  carefully  and  conscientiouslj’,  upon  a  moderate  and  conservative 
basis.  They  expressty  state  that  the  earning  capacity  of  the  road 
in  its  unfinished  condition  “does  not  afford  a  fair  test;”  and  the 
assertion  that  their  valuation  of  the  road  is  only  $11,000  per  mile 
is  altogether  erroneous. 

2.  The  report  of  the  legislative  committee  made  in  January, 
1878  (House  Document  No.  2,  pp.  9,  10),  states  the  net  earnings 
for  the  year  ending  Sept.  30,  1877,  as  found  in  the  last  Report  of 
the  Directors  (p.  5),  to  be  $184,383.37,  but  falls  into  the  singular 
error  of  deducting  therefrom  rent  of  land  in  Boston,  about 
$55,000,  although  that  rent,  amounting  to  $55,268.77,  had  been 


APPENDIX. 


150 


[Apr. 


already  once  deducted  (as  shown  in  the  Annual  Report  of  the 
Directors,  p.  5). 

The  committee  do  not  make  this  double  deduction  directly 
from  the  amount  of  the  net  earnings  as  stated  by  them ;  but  on 
p.  10  the}T  add  the  amount  of  the  rent  to  the  amount  of  interest 
which  the  Company  will  have  to  pa}’,  and  then,  in  stating  the 
ability  of  the  Company  to  meet  these  payments,  they  give  only 
the  net  earnings,  from  which  the  amount  of  the  rent  has  already 
been  deducted ;  thus  virtually  taking  from  the  net  earnings  of 
the  Company  the  rent  of  fifty-five  thousand  dollars  twice. 

The  committee  also  state  the  net  earnings  of  the  Hartford, 
Providence,  and  Fishkill  division  of  this  road,  for  the  }*ear  end¬ 
ing  Sept.  30,  1876,  to  have  been  $166,594. 

Avoiding  the  error  of  a  double  subtraction  of  the  land-rent  in 
Boston,  the  net  earnings  of  the  two  divisions  of  the  road,  one 
for  the  year  1876,  and  the  other  for  the  year  1877,  are  found 
to  have  been,  as  stated  by  the  committee,  $350,977.37.  But  by 
the  returns  of  the  Hartford,  Providence,  and  Fishkill  Road  to  the 
Railroad  Commissioners  of  Connecticut,  it  appears,  that,  for  the 
year  ending  Sept.  30,  1877  (one  year  later  than  that  referred  to 
above),  the  net  earnings  of  that  road  amounted  to  $215,938.85, 
which  is  about  $40,000  more  than  the  earnings  for  1876.  Adding 
this  amount  to  the  net  earnings  of  the  division  operated  by  the 
New-York  and  New-England  Railroad  Company,  $184,383.37, 
and  we  have  as  the  net  earnings  of  the  entire  property  for  the 
year  ending  Sept.  30,  1877,  $400,322.22,  and  this  after  deducting 
the  $55,268.77  paid  for  rent  in  Boston. 

3.  Should  the  Commonwealth  accept  the  proposition  now  under 
consideration,  the  $6,000,000  to  be  advanced  would  pay  off  all 
underlying  encumbrances,  redeem  and  secure  possession  of  the 
Hartford,  Providence,  and  Fishkill  Division,  and  complete  the 
road  to  the  Hudson  River.  That  this  amount  would  suffice  to 
accomplish  these  purposes,  appears  from  the  report  of  the  legisla¬ 
tive  committee  (p.  9),  which  states  all  the  debts  and  liabilities 

to  be . $4,016,690 

To  which  add  the  cost  of  completing  the  road  to 
the  Hudson  River,  estimated  by  the  Commis¬ 
sioners’  Report  (p.  3)  at  .  .  .  1,600,000 

$5,616,690 

The  debts  of  every  description  would  be  entirely  paid,  and  the 
corporation  would  own  property  valued,  in  its  present  unfinished 


1878.] 


APPENDIX. 


151 


condition,  by  the  Railroad  Commissioners  (see  Exhibits  5  and  6, 
House  Doc.  325,  1877),  as  follows:  — 

New-York  and  New-England,  with  its  equipment,  $5,632,459.68 
Hartford,  Providence,  and  Fishkill,  with  its  equip¬ 
ment  ........  5,463,015.78 

Aggregating  now . $11,095,475.46 

To  which  add  the  expense  of  finishing  the  road 
west  of  Waterbury,  by  which  its  value  would 
be  enhanced  to  the  amount  of  such  cost  .  1,600,000.00 

The  total  value  is  .  .  .  .  .  $12,695,475.46 

Subject  to  the  debt  for  the  advance  proposed,  6,000,000.00 

It  would  seem,  then,  to  be  demonstrated,  that,  upon  a  thoroughly 
conservative  valuation,  the  Commonwealth  would  hold  a  security 
more  than  double  the  amount  of  its  contemplated  advance. 

4.  With  reference  to  the  earning  capacity  required  to  insure 
the  success  of  the  plan,  it  is  necessary  that  the  completed  line  of 
three  hundred  and  forty-five  miles  of  railroad  should  earn  five  per 

cent  on  $6,000,000  . .  $300,000.00 

And  the  amount  now  paid  out  by  the  State  as  interest,  180,000.00 

In  all  of  net  earnings  ....  $480,000.00 

Or  onl}’  about  $1 ,400  per  mile  net  after  its  completion.  This  will 
require,  over  the  net  earnings  of  the  last  fiscal  }’ear,  an  increase  of 
only  about  $80,000  per  annum. 

If  the  property  in  its  present  unfinished  and  disjointed  con¬ 
dition,  laboring  under  many  inevitable  disadvantages,  earns  net 
$400,422.22,  exclusive  of  its  payments  for  terminal  lands  in 
Boston,  will  it  not  increase  its  net  income  far  more  than 
‘$80,000,  and  much  exceed  the  required  aggregate  of  $480,000, 
when  it  constitutes  a  continuous  line  under  one  management, 
from  Boston  to  the  Hudson  River,  and  is  then  brought  into 
close  connection  with  the  Erie  Railroad,  and  the  Pennsylvania 
Central  Railroad,  and  can  transport  coal  from  the  mines  of  Penn¬ 
sylvania  and  all  the  products  of  the  West  and  South-west,  directlj7, 
without  breaking  bulk,  to  Waterbury,  Hartford,  Norwich,  Provi¬ 
dence,  Worcester,  Boston,  and  all  other  intermediate  points? 

5.  If  the  proposition  under  discussion  is  indeed  safe  for  the 
State,  its  great  merits  in  a  business  point  of  view  to  those  whose 
duty  it  is  to  protect  and  promote  the  financial  interests  of  Massa¬ 
chusetts  require  no  explanation.  By  the  year  1900,  Massachusetts 
will  have  saved  more  than  the  entire  advance  of  $6,000,000  from 


APPENDIX. 


152 


[Apr. 


the  annual  payments  of  $180,000  ;  and  this  without  ever  pajfing 
a  dollar  from  the  public  treasur}\ 

Besides  which  the  stock  which  represents  the  State’s  present 
investment  in  the  railroad  will  be  much  enhanced  in  value. 

6.  The  very  large  interest  the  State  has  in  lands  and  docks  in 
Boston  Harbor,  —  embracing  hundreds  of  acres,  much  of  which  has 
already  been  reclaimed  at  great  cost,  and  made  read}’  for  occu¬ 
pancy,  furnishing  the  most  ample  accommodations  to  be  found  on 
our  coast  for  the  erection  at  tide-water  of  warehouses,  elevators, 
and  other  structures  necessary  for  the  conduct  of  an  extensive  foreign 
traffic,  —  cannot  but  be  favorably  affected  if  this  road,  wffiich  is  the 
only  one  that  runs  directly  to  the  State’s  newty-filled  territory,  is 
completed,  and  the  line  used  in  the  transportation  of  merchandise 
to  and  from  the  West. 

7.  It  is  for  many  reasons  important  that  the  Commonwealth 
should  arrive  at  a  prompt  and  final  decision  as  to  the  course  it 
will  pursue  in  regard  to  its  large  pecuniary  interest  in  this 
enterprise. 

The  time  limited  for  finishing  the  road  west  of  Waterbury  will 
soon  expire  (it  has  been  twice  extended  already)  ;  and  the  legis¬ 
lation  requisite  for  further  indulgence  ma}T  not  be  obtained,  unless 
evidence  can  be  presented  of  an  ability^  to  prosecute  the  con¬ 
struction  of  the  road  promptly  and  vigorously. 

8.  In  justice  to  the  present  managers  of  the  New-York  and  New- 
England  Railroad,  it  should  be  borne  in  mind  that  every  member 
of  the  board  of  directors  was  selected  and  elected  by  the  Com¬ 
monwealth,  through  the  Governor  and  Council.  No  one  of  them 
has  any  selfish  interest  to  promote  at  variance  with  that  of  the 
State  of  Massachusetts.  They  are  all  actuated  b}T  the  wish  and 
purpose  to  do  their  dut}T,  according  to  the  best  lights  they  possess, 
—  to  the  State,  the  public,  and  the  property  intrusted  to  their 
charge.  The  plan  which  they  have  submitted  is  the  best  and  only 
feasible  one  they  have  been  able  to  devise  to  insure  the  com¬ 
pletion  of  an  important  enterprise,  and  to  rescue  the  pecuniary 
interests  of  the  State  from  their  present  position  of  embarrass¬ 
ment  and  peril. 


1878.] 


APPENDIX. 


158 


STATEMENT 


SHOWING 

WHAT  THE  STATE  WILL  LOSE  IF  THE  PROPOSITION  OF  THE 
NEW-YORK  AND  NEW-ENGLAND  RAILROAD  COMPANY 
IS  REJECTED,  AND  WHAT  THE  STATE  WILL 
GAIN  IF  THE  PROPOSITION  IS  ACCEPTED. 


The  State  of  Massachusetts  in  1869  issued  its  scrip  to  the 
amount  of  three  million  six  hundred  thousand  dollars,  at  five 
per  cent,  and  loaned  the  proceeds  to  the  Boston,  Hartford,  and 
Erie  Railroad  Compan}r ;  that  company  agreeing  to  assume  the 
payment  of  the  interest  on  this  scrip  as  it  became  due. 

The  Boston,  Hartford,  and  Erie  Railroad  Company  failed  ;  and 
the  interest  on  this  scrip  the  State  will  be  obliged  to  pa}T  until 
the  year  1900,  when  the  principal  of  the  debt  becomes  due. 

The  principal  of  this  debt  is  provided  for  by  a  sinking  fund, 
controlled  by  the  State  Treasurer. 

It  is  the  interest  on  this  scrip  that  the  New- York  and  New- 
England  Railroad  Company  now  agrees  to  assume  the  pa}^ment 
of  (although  under’ no  obligations  to  do  so),  if  the  Commonwealth 
accepts  its  proposition. 

The  amount  of  the  payments  which  the  Company  offers  to  as¬ 
sume,  and  which  the  State  will  be  relieved  from  paying,  com¬ 
puting  interest  at  five  per  cent,  is  seven  million  one  hundred 
and  seven  thousand  six  hundred  and  eighty-two  dollars,  as  shown 
in  the  following  table. 


1878.  July  1.  State  pays,  $90,000 

Interest  on  same,  2,250 

1879.  Jan.  1.  Stater  pays,  90,000 

182,250 

Interest  on  same,  4,556 

1879.  July  1.  State  pays,  90,000 

276,806 

Interest  on  same,  6,920 

1880.  Jan.  1.  State  pays,  90,000 


Brought  up ,  $472,069 

Interest  on  same,  11,801 

1881.  Jan.  1.  State  pays,  90.0a0 

573,870 

Interest  on  same,  14,347 

1881.  July  1.  State  pays,  90,000 

678,217 

Interest  on  same,  16,955 

1882.  Jan.  1.  State  pays,  90,000 


373,726 

Interest  on  same,  8,343 
1880.  July  1.  State  pays,  90,000 

$472,069 


'785,172 

Interest  on  same,  19,629 
1882.  July  1.  State  pays,  _ 90,000 

$894,801 


154  APPENDIX.  [Apr. 


Brought  over ,  $894,801 

Interest  on  same,  22,370 

1883. ,  Jan.  1.  State  pays,  90,000 

1,007,171 
Interest  on  same,  25,179 

1883.  July  1.  State  pays,  90,000 

1,122,350 
Interest  on  same,  28,058 

1884.  Jan.  1.  State  pays,  90,000 

1,240,408 
Interest  on  same,  31,010 

1884.  July  1.  State  pays,  90,000 

1,361,418 
Interest  on  same,  34,035 

1885.  Jan.  1.  State  pays,  90,000 

1,485,453 
Interest  on  same,  37,136 

1885.  July  1.  State  pays,  90,000 

1,612,589 
Interest  on  same,  40,315 

1886.  Jan.  1.  State  pays,  90,000 

1,742,904 
Interest  on  same,  43,573 

1886.  July  1.  State  pays,  90,000 

1,876,477 
Interest  on  same,  46,912 

1887.  Jan.  1.  State  pays,  90,000 

2,013,389 
Interest  on  same,  50,335 

1887.  July  1.  State  pays,  90,000 

2,153,724 
Interest  on  same,  53,943 

1888.  Jan.  1.  State  pays,  90,000 

2,297,667 
Interest  on  same,  57,442 

1888.  July  1.  State  pays,  90,000 

2,445,109 
Interest  on  same,  61,128 

1889.  Jan.  1.  State  pays,  90,000 

2,596,237 
Interest  on  same,  64,906 

1889.  July  1.  State  pays,  90,000 

2,751,143 
Interest  on  same,  68,779 

1890.  Jan.  1.  State  pays,  90,000 

2,909,922 
Interest  on  same,  72,748 

1S90.  July  1.  State  pays,  90,000 

3,072,670 
Interest  on  same,  76,817 

1891.  Jan.  1.  State  pays,  90,000 

3,239,487 
Interest  on  same,  80,987 

1891.  July  1.  State  pays,  90,000 

$3,410,474 


Brought  up,  $3,410,474 

Interest  on  same,  85,202 

1892.  Jan.  1.  State  pays,  90,000 

3,585,736 
Interest  on  same,  54,643 

1892.  July  1.  State  pays,  90,000 

3,730,379 
Interest  os  same,  93,260 

1893.  Jan.  1.  State  pays,  90,000 

3,913,639 
Interest  on  same,  97,840 

1893.  July  1.  State  pays,  90,000 

4,101,479 
Int’st  on  same,  102,537 

1894.  Jan.  1.  State  pays,  90,000 

4,294,016 
Int’st  on  same,  107.350 

1894.  July  1.  State  pays,  90,000 

4,491,366 
Int’st  on  same,  112,234 

1895.  Jan.  1.  State  pays,  90,000 

4,693,600 
Int’st  on  same,  117,330 

1895.  July  1.  State  pays,  90,000 

4,900,930 
Int’st  on  same,  122,523 

1896.  Jan.  1.  State  pays,  90,000 

5,113,453 
Int’st  on  same,  128,836 

1896.  July  1.  State  pays,  90,000 

5,332,289 
Ifit’st  on  same,  133,307 

1897.  Jan.  1.  State  pays,  90,000 

5,55o,596 
Int’st  on  same,  138,889 

1897.  July  1.  State  pays,  90,000 

5,784,485 
Int’st  on  same,  144,612 

1898.  Jan.  1.  State  pays,  90,000 

6,019,097 
Int’st  on  same,  150,477 

1898.  July  1.  State  pays,  90,000 

6,259,574 
Int’st  on  same,  156,489 

1899.  Jan.  1.  State  pays,  90,000 

6,506,063 
Int’st  on  same,  162,651 

1899.  July  1.  State  pays,  90,000 

6,758,714 
Int’st  on  same,  168,968 

1900.  Jan.  1.  State  pays,  90,000 

Amount  saved  to  the  State 
it  proposition  is  ac¬ 
cepted,  $7,017,682 


COMPARISON 


OF  THE 

NEW-YORK  AND  NEW-ENGLAND  RAILROAD 

WITH  THE 

BOSTON  AND  ALBANY  RAILROAD 


AS  TO 

POPULATION  AND  VALUATION  OF  CITIES  AND  TOWNS  ON 
LINE  OF  ROADS. 


The  following  tables  show  a  comparison  of  the  population  and 
valuation  of  the  cities  and  towns  on  the  lines  of  the  New- York 
and  New-England  Railroad  and  branches,  and  the  Boston  and 
Albany  Railroad  and  Branches. 

The  figures  giving  the  'population  of  the  cities  and  towns  in 
New  York  and  Connecticut  are  those  given  in  the  United  States 
Census  in  1870 :  those  for  Massachusetts  and  Rhode  Island  are 
the  official  returns  of  the  State  Governments  for  1875. 

The  figures  showing  the  valuation  of  the  cities  and  towns  in 
Massachusetts,  Rhode  Island,  and  Connecticut,  are  also  from  the 
official  returns  of  the  State  Governments  for  1875,  copied  from  the 
“  Centennial  Postal  and  Statistical  Map,”  compiled  in  1876. 

The  valuation  of  the  cities  and  towns  on  the  lines  of  the  roads 
in  New-York  State  is  not  known,  and  is  not  given  in  the  table  of 
either  road. 


156 


APPENDIX. 


[Apr. 


NEW-YOEK  AND  NEW-ENGLAND  EAILEOAD. 

(main  line.) 


Name  or  City  or  Town. 

Population. 

Valuation. 

Boston . # . 

341,919 

$793,961,895 

Hyde  Park . 

6,316 

6,844,477 

Hedliam . 

5,756 

5,989,865 

Norwood . 

1,749 

1,792,500 

Walpole . 

2,290 

1,376,314 

Norfolk . 

920 

431,123 

Franklin . 

2,983 

1,437,200 

Bellingham . 

1,247 

527,968 

Blackstone . 

4,640 

2,111,455 

Uxbridge . 

3,029 

1,840,103 

Douglas . 

2,202 

967,046 

Thompson . 

3,804 

1,935,200 

Putnam . 

4,192 

2,084,779 

Pomfret . 

1,488 

796,936 

Hampton . 

891 

436,696 

Chaplin . 

704 

266,390 

Mansfield . 

2,402 

690,851 

Willi  mantic . 

5,413 

3,426,420 

Providence . 

100,675 

121,954,700 

Cranston . 

5,688 

6,798,750 

Warwick . 

11,614 

10,418,400 

Coventry,  R.I . 

4,580 

4,053,400 

Sterling . 

1,022 

371,869 

Plainfield . . . . . 

4,521 

2,083,120 

Canterbury . 

1,552 

603,250 

Lisbon . . 

503 

302,012 

Sprague . 

3.462 

1,317,017 

Columbia . 

891 

306,334 

Coventry,  Conn . 

2,057 

790,807 

Andover . 

462 

251,143 

Bolton . 

579 

219,794 

Vernon . 

5,447 

2,514,082 

Manchester . . 

4,236 

2,295,601 

East  Hartford . 

3,013 

1,606,482 

Hartford . 

37,825 

48,516,668 

West  Hartford . : . 

1,533 

1,885,571 

Newington  (new  town,  population  not  given) 

550,932 

New  Britain . 

9,480 

4,592,952 

Plainville . 

1,435 

864,754 

Bristol . . 

3,790 

1,952,162 

Plvmouth . 

4,149 

2,342,652 

Waterbury . 

13,148 

8,081,943 

Naugatuck . 

2,830 

1,501,856 

Middlebury . 

696 

362,381 

Oxford . 

1,338 

411,765 

South  bury . 

1,819 

704,700 

Newtown . 

3,683 

1,863,496 

Brookfield . 

1,194 

651,276 

Bethel . 

2,312 

901,402 

Danbury . . 

8,754 

5,409,409 

Southeast . 

2,975 

Patterson . 

1,418 

Pawling . 

1,760 

Beekman . 

1,486 

East  Fislikill . 

2,306 

Fishkill . 

11,752 

Newburg . 

17,014 

Total  Population  and  Valuation  Main  Line. 

674,944 

$1,063,397,898 

1878.] 


APPENDIX 


157 


BOSTON  AND  ALBANY  RAILROAD. 


(main  line.) 


Name  op  City  ob  Town^ 


Boston . 

Newton . 

Weston . 

Needham . 

Natick . 

Framingham . 

Ashland . 

Southboro’ . 

Westboro’ . 

Grafton . 

Millbury . 

Worcester . 

Leicester . 

Auburn . 

Charlton . 

Spencer  . 

Brookfield . 

West  Brookfield.. 

Warren . 

Brimfield . 

Palmer . . 

Monson . 

Wilbraham . . 

Springfield . . 

West  Springfield.. 

Westfield . . 

Montgomery . 

Russell . 

Huntington . 

( ’hester . 

Middlefield . 

Becket . 

Washington . 

Hinsdale . 

Dalton . 

Pittsfield . 

Richmond . 

West  Stockbridge. 

Canaan . 

Chatham . 

Kinderhook . 

Schodack . 

Greenbush . 

Albany . 


Population. 


Valuation. 


341,919 

16,503 

1,282 

4,548 

7,419 

5,167 

2,211 

1,986 

5.141 
4,442 
4,529 

49,317 

2,770 

1,233 

1,852 

5,451 

2,660 

1,903 

3,260 

1,201 

4,572 

3,733 

2,576 

31,053 

3,739 

8,431 

304 

643 

1,095 

1,396 

603 

1,329 

603 

1,571 

1,759 

12,267 

1.141 
1,981 
1,877 
4,372 
4,055 
4,442 
6,202 

69,422 


$793,961,895 
28,955,869 
1,731,616 
4,748,184 
3,685,190 
4,363,280 
1,380,610 
1,404,267 
2,465,373  - 
1,885,483 
2,518,118 
49,267,081 
1,964,841 
554,759 
1,010,750 
2,605,027 
1,277,593 
831,028 
1,808,537 
565,490 
1,873,662 

1.338.311 
958,355 

39,524,572 

2.806.312 
7,299,675 

141,726 

423,585 

513,225 

529,072 

372,660 

500,547 

261,856 

824,373 

1,289,227 

8,412,236 

614,189 

942,620 


Total  Population  and  Valuation  Main  Line. . . 


633,960 


$975,611,194 


158 


APPENDIX. 


[Apr. 


NEW-YORK  AND  NEW-ENGLAND  RAILROAD.  -  Continued. 


(branches.) 


Name  or  Citt  or  Town. 

Population. 

Valuation. 

‘Brookline . 

6,675 

16,503 

4,548 

650 

1,163 

4,242 

13,576 

5,064 

2,653 

5,740 

$27,579,100 

28.955,869 

4,748,184 

442,179 

945,295 

1,783,925 

9,513,270 

1,928,055 

1.046,279 

2,949,694 

Newton . 

Needham . 

Dover . 

Medfield . 

Medway . 

Bellingham  (given  in  Eastern  Division) . 

Woonsocket . 

Webster . 

Dudley . . . 

Southbridge  . . 

Total  Population  and  Valuation  Branches. . . . 

60,814 

$79,891,850 

RECAPITULATION. 


NEW-YORK  AND  NEW-ENGLAND  EAILROAD. 


Population. 

Valuation. 

Boston . 

341,919 

50,026 

100,675 

120,987 

61,337 

47,357 

13,457 

$793,961,895 

32,955,323 

121,954,700 

102,719,695 

11,806,285 

73,967,822 

5,924,028 

Eastern  Division . 

Providence . 

H.  P.  &  F.  Completed . 

H.  P.  &  F.  Incomplete . 

Woonsocket  Division . 

Southbridge  Branch . 

Total  Population  on  line  of  New-York  and 

New-England  Koad  and  Branches  . . 

Total  Valuation  of  Cities  and  Towns  on  New- 
York  and  New-England  Road  and  Branches, 
exclusive  of  Cities  and  Towns  in  New-York 
State . . . . 

735,758 

*1.143.289.748 

1 

1878.] 


APPENDIX. 


159 


BOSTON  AND  ALBANY  RAILROAD.  —  Continued. 


(branches.) 


Name  or  City  or  Town. 

Population. 

Valuation. 

Brookline . 

6,675 

3,399 

9,818 

2,803 

7,187 

1,431 

$27,579,100 

1,904,170 

East  Holliston . 

Milford . 

5,069,863 

Ghent . 

Hudson . 

Greenport . 

Total  Population  and  Valuation  Branches  . . . 

31,313 

$34,553,133 

RECAPITULATION.] 


BOSTON  AND  ALBANY  RAILROAD. 


Population. 

Valuation. 

Boston . . . 

341,919 

201,671 

90,370 

31.313 

$793,961,895 

181,649,299 

34,553,133 

Boston  to  State  Line . 

State  Line  to  Albany . 

Branches . 

Total  Population  on  B.  &  A.  Road  and  Branches 
Total  Valuation  of  Towns  and  Cities  on  the 
line  of  B.  &  A.  R.R.  and  Branches,  exclud¬ 
ing  Cities  and  Towns  in  New- York  State. . . 

665,273 

$1,010,164,327 

G 


REPORT 

OF  THE 

RAILROAD  COMMISSIONERS 

ON  THE 


FINANCIAL  CONDITION 


OF  THE 

NEW-YORK  AND  NEW-ENGLAND  RAILROAD. 


1877. 


' 


o 


Commcmtucaltl)  of  Jllassad)usctt0 


House  of  Representatives,  March  1,  1877. 

Ordered ,  That  the  Board  of  Railroad  Commissioners  be  instructed  to 
examine  into,  and  report  upon  the  financial  condition  of  the  New- York 
and  New-England  Railroad  Company;  said  examination  to  cover  the 
assets  and  liabilities  of  such  company,  together  with  all  facts  which  may 
contribute  to  a  full  knowledge  of  its  financial  affairs. 

House  of  Representatives,  March  2,  1877. 

Adopted.  Sent  up  for  concurrence. 

Geo.  A.  Marden,  Clerk. 


Adopted  in  concurrence. 


Senate,  March  7,  1877 
S.  N.  Gifford,  Clerk. 


In  compliance  with  the  foregoing  order,  an  exhibit  of  the 
present  financial  condition  of  the  New- York  and  New- 
England  Railroad  Company,  and  the  following  Report  in  ex¬ 
planation  of  certain  points  in  the  same,  is  submitted. 


164 


APPENDIX. 


[Apr. 


REPORT. 


The  New-York  and  New-England  Railroad  Company  is  an 
organization  which  succeeded  to  the  Boston,  Hartford,  and 
Erie  Railroad  Company,  under  a  strict  foreclosure  of  what  is 
known  as  the  Berdell  mortgage  on  the  property  of  the  latter. 
The  property  and  affairs  of  that  company  were  placed  in  the 
hands  of  trustees,  under  control  of  the  courts,  Sept,  13,  1871, 
and  subsequently,  on  the  27th  of  July,  1875,  were  transferred 
by  those  trustees  to  the  present  corporation.  The  views  of 
the  trustees  as  to  the  condition  of  the  property  while  held 
by  them,  and  the  necessity  for  its  transfer  to  the  new  corpo¬ 
ration,  were  set  forth  in  detail  by  them  in  a  letter  to  the 
Governor,  a  copy  of  which  is  herewith  submitted,  in  Exhibit 
No.  1,  page  11.  The  names  and  dates  of  the  numerous  ante¬ 
rior  organizations  which  have  been  merged  in  the  present 
one  are  exhibited  in  the  genealogical  chart  also  herewith 
submitted.  (Exhibit  No.  2,  page  14.) 

Length  of  Road. 

The  company  now  controls  and  operates  139  miles  of  road ; 
extending  from  Boston  to  Willimantic  in  the  State  of  Con¬ 
necticut  (86  miles),  and  from  Brookline  to  Woonsocket  in 
Rhode  Island  (34  miles),  with  branches  from  East  Thompson 
to  Southbridge  (17  miles),  and  from  Islington  to  Dedham  (2 
miles).  It  also  operates,  under  a  lease,  the  Norwich  and 
Worcester  Road  (66  miles),  partly  in  Connecticut  and  partly 
in  Massachusetts.  Besides  this  amount  of  road  in  actual 
possession  and  operation,  the  corporation  has,  under  the  terms 
of  the  Berdell  mortgage  and  the  agreements  contained  in  a 
deed  and  lease  to  the  Boston,  Hartford,  and  Erie  Railroad 
Company,  a  right  to  take  the  Hartford,  Providence  and  Fish- 
kill  Road  in  Connecticut  and  Rhode  Island  (123  miles),  now 
in  the  hands  of  trustees,  on  payment  of  underlying  and  out- 


1878.] 


APPENDIX. 


165 


standing  bonds  to  the  amount  of  $2,055,500,  secured  by 
mortgage  on  the  property  of  that  company.  It  is  also  the 
owner  of  a  franchise  and  unfinished  road-bed  from  the  ter¬ 
minus  of  the  Hartford,  Providence,  and  Fishkill  Road,  at 
Waterbury,  in  Connecticut,  to  a  junction  with  the  Dutchess 
and  Columbia  Road,  at  Hopewell  Junction,  in  New  York 
(65  miles) ;  at  which  point  it  would  secure  a  through  con¬ 
nection  with  the  Erie  and  other  Roads  of  the  national  system. 
The  company  is  also  authorized  to  extend  its  road  from 
Hopewell  Junction  to  the  Hudson  River. 

To  secure  the  possession  of  the  whole  property  covered  by 
the  Berdell  mortgage,  and  to  complete  the  company’s  connec¬ 
tions,  would  require  an  outlay  of  $2,055,500  in  payment  of 
the  Hartford,  Providence,  and  Fishkill  debt,  and  the  expendi¬ 
ture  of  not  less  than  $1,600,000  in  the  completion  of  the  ex¬ 
tension  west  of  Waterbury.  This  last  portion  of  the  route, 
the  members  of  the  Board  have  not  personally  examined  ;  but 
they  submit  the  above  figures  as  the  estimate  of  two  very 
competent  engineers,  which  have  been  communicated  to  the 
Board  as  part  of  the  present  investigation.  It  would  appear, 
therefore,  that  a  further  investment  of  $3,655,500  would  se¬ 
cure  to  the  New- York  and  New- England  Company  a  fairly 
equipped  road  of  327  miles  of  main  track  and  branches,  with 
13  miles  of  double  track,  constituting  a  through  line  from  the 
cities  of  Boston  and  Providence  respectively  to  a  Western 
connection. 


Liabilities. 

The  corporation  now  owes  a  net  debt  of  $1,011,201.48, 
after  deducting  cash  and  cash  assets;  of  which  $343,000  is 
funded  in  its  seven-per-cent  mortgage-bonds,  being  a  part  of 
a  total  issue  of  $10,000,000  authorized  by  law.  (Acts  1873, 
chap.  289,  sect.  4.)  The  balance  of  the  above  indebtedness, 
amounting  to  $668,201.48,  is  ill  the  form  of  notes,  &c.,  $513,- 
500  of  which  have  been  overdue  since  September,  1876,  and 
are  still  unpaid,  being  carried  at  seven-per-cent  interest  by 
the  present  holders.  In  addition  to  the  $343,000  mortgage- 
bonds  above  referred  to  as  outstanding,  156  other  bonds  of 
$1,000  each,  of  the  same  description,  though  unissued,  have 
been  placed  as  collateral  in  the  hands  of  certain  holders  of 
unsecured  notes.  The  balance  of  these  bonds,  $9,501,000, 


166 


APPENDIX. 


[Apr. 


are  in  the  possession  of  the  corporation.  The  $343,000  bonds 
which  have  been  issued  were  sold  by  the  corporation  at  a 
discount  of  $67,800  from  their  face  value.  The  notes  matur¬ 
ing  September,  1876,  originally  amounted  to  $750,000,  and 
were  subscribed  for,  and  subsequently  taken,  at  their  par 
value ;  except  one  amount  of  $200,000,  which,  the  first  sub¬ 
scriber  being  unable  to  take  them,  were  sold  at  a  discount  of 
15  per  cent.  With  a  view  of  aiding  the  enterprise,  the  State 
of  Massachusetts  took  $250,000  of  these  notes,  which  are  still 
unpaid;  and  the  balance  was  taken  by  the  directors,  or  by 
others  through  their  influence. 

This  total  net  liability  ($1,011,201.48)  of  the  new  corpora¬ 
tion  represents  the  amount  which  still  remains  unliquidated* 
of  an  indebtedness,  as  appears  by  its  books,  of  $1,568,056, 
incurred  on  account  of  expenses  and  disbursements  of  an 
unusual  character  since  the  road  went  into  the  hands  of 
receivers  in  August,  1870.  These  items  of  unusual  expendi¬ 
ture  are  set  forth  in  detail  in  Exhibit  No.  3,  page  14.  Under 
ordinary  circumstances  of  re-organization,  they  would  have 
appeared  as  a  part  of  the  original  cost  of  the  property,  and 
have  been  charged  directly  to  the  construction  account. 
They  include  the  following:  — 

Legal  and  other  expenses  incident  to  foreclosure  and  ob¬ 
taining  possession  of  the  property  ....  $564,364  70 

Expended  in  completing  the  Willimantic  extension  and 
other  permanent  improvements  .....  1,003,691  48 

$1,568,056  18 

\ 

The  whole  of  this  expenditure  seems  to  have  been  legiti 
mately  made,  and  its  items  properly  charged.  Of  it  the  sum 
of  $55,854.70  has  been  met  out  of  the  net  earnings  of  the 
company,  leaving  outstanding  a  total  net  debt  of  $1,011,201.48, 
as  reported. 

Of  the  whole  amount  ($20,000,000)  of  Berdell  bonds, 
$5,685,000  only  have  been  converted  into  stock,  of  which 
the  Commonwealth  holds  $3,600,000. 

An  impression  is  understood  to  prevail  among  certain  of 
the  less  well-informed  holders  of  these  bonds,  that  they  still 
constitute,  in  some  way,  a  liability  of  the  new  corporation. 
It  is  hardly  necessary  to  say  that  this  impression  is  wholly 

*  Jan.  31,  1877.  See  Exhibit  No.  9  (p.  21). 


1878.] 


APPENDIX. 


167 


erroneous.  The  Berdell  bonds  now  outstanding  are  wholly 
valueless,  except  for  conversion  into  New-York  and  New- 
England  Railroad  Company,  stock. 

Other  Liabilities. 

(1.)  New-York  and  New-England. 

In  addition  to  the  undisputed  gross  liabilities  incurred 
since  August,  1870,  amounting  to  $1,072,044,  mortgage-bonds 
of  various  prior  issues,  a  portion  of  which,  it  is  claimed,  were 
illegally  issued,  are  still  outstanding,  to  the  amount,  with  ac 
crued  interest,  of  $740,422.  They  do  not  appear  on  the 
books  of  the  present  corporation,  nor  in  the  official  returns 
published  by  this  Board ;  as  they  constitute  a  disputed  lia¬ 
bility,  the  extent  of  which,  within  the  amount  above  named, 
remains  to  be  determined.  They  are,  however,  fully  referred 
to  in  the  recent  Report  of  the  directors  of  the  company  to  its 
stockholders.  The  several  classes  of  these  underlying  bonds 
are  set  forth  in  detail  in  Exhibit  No.  4,  page  16.  Other  claims 
for  land-damages,  &c.,  to  an  amount  not  probably  exceeding 
$50,000,  are  also  outstanding  or  in  litigation. 

(2.)  Hartford ,  Providence ,  and  Fishkili. 

The  assets  and  liabilities  of  this  road  are  set  forth  in  Ex¬ 
hibit  No.  5,  page  17. 

The  right  of  the  New-York  and  New-England  Railroad 
Company  to  take  the  Hartford,  Providence,  and  Fishkili  Road 
on  the  payment  of  its  outstanding  debt,  is  contested  on  the 
part  of  a  portion  of  the  holders  of  1,678  shares  of  preferred, 
and  3,312  shares  of  common  stock  of  that  corporation.  This 
question  is  before  the  courts.  The  counsel  for  the  New-York 
and  New-England  corporation  express  the  utmost  confidence 
in  the  strength  of  its  case  ;  claiming  that  this  is  but  one  of 
numerous  vexatious  suits  to  which  the  property  has  been 
subjected  since  the  year  1871.  The  original  commissioners 
appointed  under  the  Boston,  Hartford,  and  Erie  Loan  Act  of 
1867  —  among  whom,  it  will  be  remembered,  were  the  Hon. 
Geo.  T.  Bigelow  and  the  late  Gov.  Emory  Washburn  —  had 
their  attention  called  to  this  claim,  but  do  not  appear  to  have 
thought  it  worthy  of  serious  consideration.  (Legis.  Docs., 
1869,  Senate  No.  7,  pages  9, 15).  The  balance  of  this  stock, 


168 


APPENDIX. 


[Apr. 


being  3,327  of  preferred,  and  12,067  of  common,  or  a  ma¬ 
jority  of  each,  is  owned  by  the  New-York  and  New-England 
Railroad  Company. 

Should  the  present  corporation,  by  the  sale  of  its  bonds  at 
par,  raise  the  necessary  funds  to  complete  its  line,  by  lifting 
the  Providence,  Hartford,  and  Fishkill  mortgage,  and  com¬ 
pleting  the  extension  to  Hopewell  Junction,  it  would  then,  if 
no  other  indebtedness  was  incurred,  have,  including  under¬ 
lying  bonds  and  interest  before  mentioned,  a  total  direct 
liability  of  $5,497,966,  with  a  possible  further  liability  of 
$50,000 ;  the  amount  of  which  last  will  depend  upon  the  set¬ 
tlement  of  contested  claims.  This  would  be  in  the  neighbor¬ 
hood  of  $17,000  of  indebtedness  to  each  mile  of  completed 
road.  The  sale  of  the  company’s  bonds  at  a  discount  would, 
of  course,  increase  this  indebtedness  by  the  amount  of  such 
a  discount. 

Assets. 

The  assets  of  the  company  will  be  found  set  forth  in  detail 
in  Exhibit  No.  6,  page  18.  Upon  the  books  of  the  company, 
the  property  stands  at  a  nominal  cost  of  $21,061,729.47 ;  the 
Berdell  bonds  being  entered  at  their  par  value.  Under  the 
appraisal  made  by  the  Commissioners,  the  total  value  of 
the  company’s  present  assets,  exclusive  of  the  unfinished 
road  west  of  Waterbury,  and  its  contingent  interest  in  the 
Hartford,  Providence,  and  Fishkill,  is  $5,632,459.68.*  For 
the  purposes  of  this  appraisal,  it  was  necessary  to  set  some 
arbitrary  valuation  upon  the  road  owned  and  operated.  This 
was  fixed  at  $36,000  per  mile,  a  sum  much  less  than  the  ac¬ 
tual  cash  cost ;  and  includes  the  value  of  all  the  lands  owned 
or  claimed  by  the  company,  whether  embraced  in  its  location 
or  otherwise,  except  the  grove  at  Highland  Lake  in  Norfolk, 
The  value  of  a  railroad,  however,  depends  in  a  comparatively 
small  degree  on  its  cost  compared  with  its  earning  capacity. 
In  the  case  of  an  uncompleted  road  like  the  New-York  and 
New-England,  this  is  usually  small,  and  does  not  afford  a  fair 
test.  Judged  by  it,  however,  the  appraised  value  of  this 
road,  as  now  equipped  and  operated,  would  not  probably 
exceed  $11,000  per  mile.  The  rolling-stock  has  been  sepa¬ 
rately  appraised,  and  appears  in  Exhibit  No,  3,  page  19,  at  its 
present  cash  value. 


*  Including  c^sh  assets. 


1878.] 


APPENDIX. 


169 


As  respects  tlie  lease  of  the  Norwich  and  Worcester  Road 
by  the  New-York  and  New-England  Company,  a  difference  of 
opinion  exists,  and  apparently  with  reason.  By  some  it  is 
claimed  that  it  is  a  valuable  asset,  while  others  insist  that  it 
is  a  burden.  From  the  books  of  the  company,  it  appears  that 
since  1870  the  annual  rental  has  been  regularly  in  excess  of 
receipts.  The  amounts  annually  paid  or  received  are  set 
forth  in  Exhibit  No.  8,  page  20.  As  respects  the  value  of 
this  lease,  the  Commissioners  cannot  venture  an  opinion. 
The  advantages  of  a  lease  of  one  road  by  another  are  often 
indirect  and  obscure,  but  still  great;  while  the  disadvantages 
are  upon  the  surface.  In  this  case,  however,  the  lease  is  ter¬ 
minable  at  short  notice,  and,  should  it  prove  seriously  disad¬ 
vantageous,  would  doubtless  be  brought  to  a  close.  So  far  as 
appeared  in  the  course  of  this  inquiry,  one  only  of  the  New- 
York  and  New-England  directors  is  now  in  any  way  person¬ 
ally  interested  in  the  Norwich  and  Worcester  Road. 

Earning  Capacity. 

A  thorough  examination  of  the  books  and  accounts  of  the 
company,  tested  by  an  appraisal  of  its  property,  and  a  care¬ 
ful  inspection  of  its  road-bed,  track,  stations,  shops,  and 
equipment,  in  the  light  of  previous  similar  inspections  by  the 
Board  during  the  last  six  years,  would  seem  to  warrant  the 
statement,  that,  since  the  road  has  been  in  the  hands  of 
the  trustees,  it  has  earned,  in  its  unfinished  condition,  in  the 
neighborhood  of  $100,000  net  per  annum.  This  is  exclusive 
of  the  annual  rent  ($70,000)  paid  for  the  use  of  terminal 
grounds  in  Boston :  a  charge  which  is  ordinarily  included  in 
the  permanent  investment  of  railroad  companies,  but,  in  this 
case,  has  to  be  met,  as  if  it  were  an  interest  charge,  out  of  net 
earnings.  What  the  net  earning  capacity  of  the  road  would 
be,  in  case  of  its  completion  according  to  its  original  design 
as  a  railroad  enterprise,  is  matter  largely  of  conjecture.  The 
Hartford,  Providence,  and  Fishkill  Road  is  unquestionably  a 
valuable  property,  and  worth  far  more  to  the  New-York  and 
New-England  Company  than  the  amount  necessary  to  secure 
possession  of  it.  How  much  more,  however,  can  only  be  esti¬ 
mated.  Operated  independently,  the  road  has,  according  to 
memoranda  furnished  this  Board  by  the  trustees  of  the  bond¬ 
holders,  earned,  in  excess  of  expenses  and  interest  on  its  debt, 


1T0 


APPENDIX. 


[Apr. 


since  Feb.  1,  1758,  when  it  came  into  their  possession,  the  an¬ 
nual  interest  on  a  little  less  than  $ 2,000,000  at  six  per  cent. 
Besides-  making  extensive  improvements  and  additions  to 
property,  specified  in  the  memoranda  referred  to,  the  trustees 
have  paid  off  an  underlying  debt  of  $52,230  from  the  net 
earnings.  Based  upon  its  earnings,  the  property  would  now 
seem  to  be  worth  in  the  neighborhood  of  $2,000,000  over  and 
above  its  indebtedness.  The  road  is  operated  wholly  inde¬ 
pendently  of  the  New-York  and  New-England,  and  in  con¬ 
nection  with  other  and  competing  companies.  As  a  con¬ 
tributing  addition  to  the  present  road,  its  indirect  value,  as 
increasing  the  earning  capacity  of  the  latter,  would  be  very 
considerable. 

As  to  the  value  of  the  Waterbury  extension,  connecting  as 
it  would  the  New-York  and  New-England  with  the  Dutchess 
and  Columbia,  and,  by  means  of  this  last,  with  the  Erie  Boad, 
the  members  of  this  Board  have  no  peculiar  means  of  form¬ 
ing  a  judgment.  The  unfinished  road  has  now  cost  $50,000 
per  mile,  and  it  is  estimated  that  it  will  cost  $25,000  per 
mile  more  to  complete  it.  In  Exhibit  No.  6,  page  18,  it  is  en¬ 
tered  among  the  assets  of  the  company  at  $11,000  per  mile ; 
as  that  sum,  with  the  additional  amount  of  $25,000  per  mile 
necessary  to  complete  it,  will  bring  its  cost  to  the  arbitrary 
appraised  valuation  of  $36,000  per  mile.  The  value  of  this 
extension,  however,  lies  in  its  earning  capacity  in  connection 
with  the  other  and  completed  portions  of  the  line.  The  man¬ 
agers  of  the  property  express  confidence  that  ,  this  would 
prove  very  great. 


The  Management. 

A  thorough  inspection  of  the  road,  made  personally  by  the 
members  of  this  Board,  and  under  its  direction  by  Mr. 
John  B.  Winslow,  formerly  superintendent  of  the  Boston 
and  Lowell  Road,  an  expert  whose  authority  in  such  matters 
cannot  be  questioned,  showed  conclusively  that  it  is  well 
managed,  that  an  excellent  discipline  prevails  among  its 
employes,  and  that  its  expenditures  are  judiciously  and 
carefully  made.  The  condition  of  the  property  has  greatly 
improved  in  all  respects  within  the  last  few  years,  except  on 
that  portion  of  the  road  in  the  State  of  Connecticut.  This 
the  members  of  the  Board  had  not  inspected  before,  and 


APPENDIX. 


171 


1878.] 

were  consequently  without  data  for  comparison.  It  is,  how¬ 
ever,  a  verjr  difficult  section  of  road  to  maintain,  and  now 
requires  immediate  attention  and  outlay  at  many  points.  In 
Massachusetts,  however,  the  improvement  in  the  road-bed, 
tracks,  buildings,  rolling-stock,  and  shops  is,  considering  the 
means  at  the  disposal  of  the  company,  highly  creditable. 

Hitherto  the  road  has  been  entirely  sustained  on  the  profits 
of  its  local  business ;  and  the  members  of  this  Board  are  not 
in  position  to  express  any  decided  opinion  as  to  whether  that 
business  has  been  developed  with  perfect  judgment,  and  to 
its  full  extent,  or  otherwise.  Those  managing  the  affairs  of 
the  company  have  recently  also  made  an  effort  to  secure  busi¬ 
ness  by  means  of  an  all-rail  through  connection  beyond  and 
around  New-York  City.  It  is  very  questionable  whether  this, 
as  yet,  has  resulted  in  any  profit.  Nevertheless,  it  was  an 
experiment  which  those  intrusted  with  the  management 
would  seem  to  have  been  justified  in  making,  and  to  which 
they  were  in  some  degree  compelled.  They  ventured  their 
own  means  in  its  development ;  and  its  failure  would  be  felt 
by  them  personally  more  than  by  the  corporation,  which, 
indeed,  seems  to  have  risked  nothing  but  the  proof  of  its 
inability  to  develop  a  necessary  but  then  unremunerative 
through  business. 

The  books  and  accounts  of  the  corporation  are  kept  in  de¬ 
tail,  and  on  the  most  approved  plan,  except  in  one  important 
particular.  Bills  contracted  during  each  mo'nth  are  not 
entered  up  at  its  close,  unless  they  have  been  paid.  In  order 
that  the  liabilities  of  the  company  may  distinctly  appear,  they 
should  be  entered  up  monthly,  whether  paid  or  not.  This 
objectionable  practice  is  not,  however,  peculiar  to  the  New- 
York  and  New-England  among  the  Boston  roads.  The 
vouchers  and  papers  of  the  company  will,  in  completeness 
and  accuracy  of  arrangement,  compare  favorably  with  those 
of  any  corporation  in  the  State.  Under  the  system  in  use  in 
these  respects,  fraud  or  suppression  would  only  be  possible 
through  a  conspiracy  to  that  end,  which  would  have  to  in¬ 
clude  a  number  of  responsible  officials. 

All  desired  information  on  other  points,  not  matters  of 
estimate  or  opinion,  connected  with  the  affairs  of  this  corpo¬ 
ration,  can,  it  is  believed,  be  derived  from  a  study  of  the 
figures  and  documents  herewith  submitted,  and  the  annual 


172 


APPENDIX. 


[Apr. 


returns  included  in  the  Railroad  Commissioners’  Reports  for 
the  last  two  years.  In  closing  this  Report,  however,  the 
Commissioners  deem  it  but  justice  to  sa y  one  word  further  of 
the  present  management.  As  is  well  known,  those  in  con¬ 
trol  of  the  corporation  which  have  heretofore  been  in  pos¬ 
session  of  this  property  have  been  the  subject  of  much,  and 
not  undeserved,  adverse  criticism.  It  would  not  be  unnatu¬ 
ral  if  a  portion  of  the  suspicion  excited  by  their  proceedings 
had  descended  to  their  successors.  Meanwhile  the  recent 
investigation  has  been  made  as  thorough  as,  with  the  aid  of 
experts  and  accountants,  it  was  in  the  power  and  knowledge 
of  the  members  of  this  Board  to  make  it.  Their  chief  appre¬ 
hension  has  been  throughout,  lest,  in  its  results,  it  should  be 
generally  looked  upon  as  what  is  known  as  a  “whitewashing  ” 
process.  It  hardly  needs  to  be  said,  that,  to  Commissioners 
and  the  like  public  officials,  it  js  much  more  agreeable,  and 
requires  far  less  courage,  to  unearth  frauds  and  make  ex¬ 
posures,  than  to  pronounce  affairs  properly  conducted.  In 
the  present  case,  however,  the  members  of  the  Board  wish 
distinctly  to  say  that  every  facility  for  obtaining  information, 
and  arriving  at  correct  judgments,  has  been  afforded  them 
throughout  their  inquiry ;  and  that  they  have,  in  the  course 
of  it,  been  most  favorably  impressed  as  respects  the  honesty 
and  excellent  intentions  of  the  present  New-York  and  New- 
England  direction.  Whether  those  composing  it  will  be 
found  justified  in  their  expectations  by  the  result,  is  a  matter 
upon  which  it  would  be  wholly  out  of  place  for  the  members 
of  this  Board  to  express  any  opinion.  That  they,  however, 
have  faith  in  their  enterprise,  and  are  honestly  and  stren¬ 
uously  exerting  themselves  to  develop  it  in  a  business-like 
way,  was  apparent  throughout  the  examination,  and  equally 
impressed  every  person  engaged  in  it. 

C.  F.  ADAMS,  Jit., 

A.  D.  BRIGGS, 

FRANCIS  M.  JOHNSON, 

Railroad  Commissioners. 


1878.] 


APPENDIX. 


173 


Exhibit  No.  1. 

Copy  of  Letter  sent  the  Governor  and  Council  by  the  Trustees  Ber - 
dell  Mortgage ,  January ,  1874. 

[Copy.] 

Boston,  Jan.  15,  1874. 

To  His  Excellency  the  Governor  and  the  Honorable  Council,  of  the  Commonwealth. 

Gentlemen,  —  Desirous  as  we  are  of  performing  our  full  duty,  we 
address  you  as  representing  and  controlling  the  largest  interest  in  the 
bonds  secured  by  the  mortgage  by  the  Boston,  Hartford,  and  Erie  Rail¬ 
road  Company  to  Berdell  and  others,  of  which  we  are  now  the  trustees. 

We  took  possession  of  the  property,  for  the  purpose  of  foreclosing  the 
mortgage,  in  August,  1871. 

At  that  time  and  since,  we  have  received  all  the  assistance  which  we 
have  asked  from  the  several  courts  having  jurisdiction,  and  from  the 
bondholders,  including  the  Commonwealth:  and  the  foreclosure  was  per¬ 
fected  in  April,  1873,  and  the  meeting  of  bondholders  duly  advertised 
and  held  in  exact  accordance  with  the  provisions  of  the  instrument;  and 
the  new  corporation  authorized  thereby  was  organized  under  the  name  of 
the  New-York  and  Xew-En^land  Railroad  Company. 

Subsequent  legislation  by  the  four  States  in  which  the  property  is 
situated,  ratified  and  confirmed  the  validity  of  the  proceedings.  The  task 
of  the  trustees  was  then  accomplished;  and  they  were,  and  ever  since  have 
been,  desirous  of  having  their  accounts  audited  and  settled,  —  of  being 
relieved  of  further  liability,  and  of  conveying  the  property  by  deed  to  the 
new  corporation  as  provided  in  the  mortgage.  Thus  far  they  are  disap¬ 
pointed,  and  are  still  in  the  management  of  the  road  and  of  its  leasehold 
interests. 

It  is  evident  that  continued  management  of  such  property  by  trustees 
cannot  be  for  the  interest  of  its  owners  or  of  the  public. 

Legal  inability  to  make  contracts  of  any  definite  duration  is  of  itself  a 
great  obstacle  in  securing  skilled  and  trained  assistance  in  the  various 
departments  upon  which  a  successful  administration  of  a  railroad  de¬ 
pends  in  great  measure.  In  the  present  case,  underlying  liens  exist;  and, 
indeed,  a  large  and  important  portion  of  this  property  is  managed  by 
trustees  of  another  and  underlying  mortgage.  We  are  without  means  to 
extinguish  these  liens;  but  that  they  should  be  paid  can  admit  of  no 
doubt.  The  bonds  secured  by  this  mortgage  are  now  only  of  use  by  con¬ 
version  into  stock  of  the  new  corporation,  which  owns  the  entire  property, 
subject,  of  course,  to  these  liens. 


174  APPENDIX.  [Apr. 

It  seems  to  us,  therefore,  that  those  interested  in  the  New-York  and 
New-England  Railroad  Company  should,  — 

1.  Obtain  conveyance  and  possession  of  the  property  held  by  us; 

2.  Divest  it  of  all  underlying  liens; 

3.  Obtain  possession  of  that  portion  held  by  the  trustees  of  the  (un¬ 
derlying)  Hartford,  Providence,  and  Fdshkill  mortgages,  and  then  — 

4.  Complete  and  equip  the  unfinished  portion. 

To  accomplish  the  first  end,  the  trustees  must  be  furnished  with  the 
funds  necessary  to  repay  to  contributing  bondholders,  including  the  Com¬ 
monwealth,  the  amount  advanced  by  them  to  enable  the  trustees  to  obtain 
possession  in  1871;  which,  with  interest,  amounts  to  about  $200,000,  and 
with  funds  to  liquidate  the  indebtedness  incurred  by  them  in  the  opera¬ 
tion  of  the  road  with  safety.  The  amount  cannot  be  stated  exactly,  but 
approximates  $200,000,  and  includes  the  cost  of  finishing  the  Williman- 
tic  division,  of  rebuilding  over  forty  bridges,  of  replacing  the  passenger 
and  freight  houses  in  Boston  destroyed  by  fire  in  1872,  the  losses  on 
freight  burned  at  that  time,  the  addition  of  rolling-stock  of  a  cost  of  over 
$150,000,  and  the  renewal  of  more  than  twenty  miles  of  track. 

Possession  of  the  property  held  by  us  will  include  the  road  — 


From  Boston  (Summer  Street)  to  Willimantic  ...  86  miles. 

East  Thompson  to  Southbridge . 17  “ 

Brookline  to  Woonsocket . 34  “ 

Springvale  to  Dedham . 2  “ 


Say  of  completed  and  equipped  road . 139  miles. 

And  of  road  two-thirds  graded,  from  Waterbury,  Conn., 
west . 65  “ 


Or  in  all  of .  204  miles. 


Of  road,  beside  the  management  of  the  leasehold  interest  in  the  Norwich 
and  Worcester  Railroad  and  the  Norwich  and  New-York  Transportation 
Company. 

To  accomplish  the  next  object,  viz.,  to  divest  this  property  of  all  un¬ 
derlying  liens,  will  require  about  $1,000,000.  These  liens  comprise  the 
small  outstanding  parcels  of  seven  different  mortgages  issued  by  the  Bos¬ 
ton,  Hartford,  and  Erie,  and  by  preceding  corporations;  over  7,000,000 
of  which  bonds  have  been  retired,  and  are  in  our  possession.  To  cancel 
what  are  still  outstanding,  with  accrued  interest,  will  require,  say  $742,- 
500;  and  the  receiver’s  certificate  of  indebtedness  (issued  under  authority 
of  court,  and  declared  to  underlie  this  mortgage,  being  for  the  completion 
of  the  road  between  Putnam  and  Willimantic),  which  matured  on  the 
first  instant,  will  require  the  balance,  $250,000,  for  principal,  and  $7,500 
interest  to  Jan.  1,  1874. 

$1,400,000,  therefore will  be  necessary  to  obtain  possession,  and  to 
own  free  of  encumbrance,  the  road  above  described. 

The  third  object,  viz.,  the  possession  of  the  Hartford,  Providence,  and 
Fishkill  Road,  upon  which  this  is  a  second  mortgage,  will  require 


Exhibit  No.  2. 


GENEALOGICAL  CHART. 

NEW- YORK  AND  NEW-ENGLAND  RAILROAD. 


RAILROAD  COMPANIES. 

1845  ’46  ’47  ’48  ’49  ’50  ’51  ’52  ’53  ’54  ’ 

55  ’56  ’57  ’58  ’59  ’60  ’61  ’62  ’63  ’64  ’65  ’66  ’67  ’68  ’69  ’70  ’71  ’72  ’7 

3  ’7’ 

4  ’7 

5 

Walpole  . 

Norfolk  County  .... 

SoUTHBRIDGE  AND  BlACKSTONF.  . 

Inc.  United. 

Dcd  ham 

to  Walpole, 

8.50  m  iles. 

r 

Mortgage, 

Un 

ed.  • 

Dedham  to  Blackstone,  25.75  miles. 

no 

Blackstone  to  Soutlib  ridge,  33.75  miles. 

Inc. 

Boston  to  South  Ded  ham,  12.50  miles. 

Mortgage, 

$1,200,000. 

So! 

ld-  Boston  to  Mee 

hanic:8ville,l 

nclud  ing  S: 

outlib 

ridge  and  Dedham: 

Bran  dies,  79  miles. 

East  Thompson . 

Ino. 

So 

In  East  Thom 

pson,j  2  mile 

8. 

Sold. 

Bosto 

n  to 

Mechanicsv’e,  incl. 

South  bri’ge  &  Dedham  B 

ranch’s 

,79  m 

ties. 

changed. 

Inc.  | 

id. 

Southern  Midland  .... 

•i.oooKoof 

|  u 

u 

( t  u 

,,  ,, 

4t 

(«  4 

4 

IDO. 

Sold. 

i  Mee 

hanlc  sville  to  Williman 

tic,  26  miles  . 

New-York  and  New-EnglandI 

Formerly  r  • 

Boston,  Hartford,  and  Erie  ) 

Hartford,  Providence,  and  Fishkill, 

Hartford  and  Providence 

New-York  and  Hartford  . 

Boston  to  Willlmantic,  including  Dedham  Branch,  87. 

68  miles.  —  East  Thompson  1 

Mortgage. 

$10,000,000. 

$ao«. 

Reoelvote  Truote,.  XL  V. 

IN.  E. 

Prop. 

ILR. 

erty 

c  R 

to  Southbridgc,  17.00  miles. -Brookline  to  woonsocaet,  oo.,.,  .uncs.-riovi-  ^Xotal  length  of  road,  411.53  raile8. 
dence  to  Waterhuvy,  122.50.  —  Waterbury  to  Hudson  River,  76.25.  —  Worcester 
to  Allyn’s  Point,  66  miles.  —  So.  Manchester  and  Rockville  Branches,  7.75  miles,  j 

»3BK-  . 

B.  H.  &  E.  R.R. 

Providence  to  "Waterb 

ury,  ■  122.5:0  miles. 

N.  7. 

4  N.  E. 

R.R. 

Ino. 

Hartford  to  Rho  de  Island  State  line. 

61  miles. 

So 

Lea 

°ed. 

Ino. 

Hartford  to  New  York  State  line,  69.13  miles. 

Ino. 

Unit 

Providence  to  C  onnecticut  State  line,  29  miles. 

Providence  and  Plainfield  •  . 

“  1 

ed. 

It 

10. 

Conn.  State  line  to  Hu 

dson  Riv.,  ;39.78  miles. 

B.,  H.,  and  E.  Extension  . 

Mortgage,  Mortgage, 

•400,000.  •1,600,000. 

Brookline  to  Woonsoc 

ket,,  3  3.75  !milee. 

New-York  and  Boston 

Charlrs-River  .  •  .  .  • 

:  •  •  •  In0* 

Brookline  to  Bellingham,  27.75  miles. 

Ciiarles-River  Branch 

I 

Inc. 

Mortgage. 

$  160,000. 

Uni  ted. 

Broo  kline  to  Dover,  12.50  miles. 

Norwich  and  Worcester  . 

“  i 

Uni 

- - - Lei 

Wore  :cster  to  Allyn’s  Po 
180(1.  ; 

int,  66 

miles 

1845  ’46  ’4 

17  ’48 

’49  ’50  ’ 

51  ’52  ’ 

53  ’54 

’55  ’56  ’57  ’58  ’59  ’60  ’61  ’62  ’63  ’64  ’ 

65  ’ 

66  ’67  ’68  ’69  ’70  ’71  ’72  ’ 

73  ’7 

4  ’75 

1878.] 


APPENDIX. 


1T5 


$2,000,000  more.  The  principal  of  the  debt  is  $2,055,500;  but  there  are 
sinking-funds  applicable  to  portions  of  the  principal,  which  are  believed 
to  be  sufficient  to  reduce  the  net  debt  (after  auditing  the  accounts  of  the 
trustees  in  possession,  and  providing  for  any  amounts  found  due  to  them) 
to  the  amount  mentioned.  That  road  is  122  miles  in  length,  from  Provi¬ 
dence,  R.I.,  to  Waterbury,  Conn.,  finished,  fully  equipped,  and  earning 
about  $1,000,000  per  annum  gross.  The  interest  on  the  mortgage  is 
paid  by  the  trustees  in  possession,  and  the  debt  is  not  increasing.  The 
amount  of  it,  say  $16,000  per  mile,  bears  a  very  small  proportion  to  the 
cost  or  to  the  value  of  such  property. 

Three  and  a  half  million  dollars,  therefore,  is  requisite  before  the  New- 
York  and  New-England  Railroad  Company  can  own  unencumbered  the 
property  already  in  existence,  — say  260  miles  of  completed  and  equipped 
railway  in  the  centre  of  New  England,  earning  gross  about  $2,000,000 
annually,  and  65  miles  of  road  upon  which  $2,000,000  has  already  been 
expended,  the  completion  of  which,  to  a  connection  at  the  Hudson  River, 
will  raise  the  existing  property  from  the  character  of  a  local  road  to  that 
of  a  principal  connection  with  the  coal,  the  oil,  and  the  grain  regions  of 
the  West.  Its  business  is  already  assured  by  the  interests  of  an  inde¬ 
pendent  system  of  railroads  west  of  the  Hudson  River,  which, now  has  no 
outlet  into  New  England. 

To  complete  the  property,  and  to  pay  for  the  necessary  terminal  facilities 
at  Boston,  at  Worcester,  and  at  Providence,  and  to  equip  it  thoroughly, 
will  require  the  balance  of  the  $10,000,000  which  the  new  corporation 
has  been  by  legislation  already  authorized  to  borrow  upon  its  own  mort¬ 
gage-bonds. 

Suggestions  upon  this  point  are  not  perhaps  within  the  scope  of  our 
duty  as  trustees  ;  but  that  the  New-York  and  New-England  Railroad 
Company  (in  which  the  Commonwealth  is  so  largely  interested)  should 
obtain  possession  of  the  property  already  in  existence,  and  relieve  it  of 
underlying  liens,  is,  to  us,  very  apparent  ;  that  the  security  which  the 
property  affords  to  the  lender  of  the  requisite  money  or  credit  is  absolute, 
is  unquestionable  ;  and  that  the  parties  in  interest  should  move  promptly 
is  in  our  judgment  undeniable. 

This  communication  is  made  for  the  single  purpose  of  advising  you  of 
the  situation ;  and  we  will  gladly  attend,  or  give  any  details,  or  make 
further  suggestions,  whenever  apprised  of  a  wish  on  your  part  to  obtain 
them. 

Very  respectfully,  your  obedient  servants, 

(Signed)  Wm.  T.  Hart. 

Charles  P.  Clark. 


176 


APPENDIX. 


[Apr. 


Exhibit  No.  3. 


Statement  of  Extraordinary  Expenses ,  and  of  Improvements  and 
Addition  to  Property ,  of  the  New-  York  and  New-England  Pail- 
road,  from  August ,  1870 ,  to  Sept.  30,  1876. 

Extraordinary  Expenses  attending  Foreclosure  Berdell  Mort¬ 
gage. 

Receivers.  In  charge  Aug.  1,  1870,  to  September,  1871, — 

Pay  ....  $48,866  66 

Counsel  fees  .  .  43,801  72 

Expenses  court,  print¬ 
ing,  &c.  .  .  .  10,652  77 


And  by  order  of  court,  — 

Norwich  and  Worcester,  back  balances 
and  deficit  ..... 
Boston,  Hartford,  and  Erie  Railroad 
Company,  to  maintain  organization, 


$103,321  15 

106,816  71 
9,907  11 

Trustees.  In  charge  September,  1871,  to  August,  1875, — 
Total  compensation  ....  $81,836  80 

By  order  of  court, — 

To  sundry  parties  to  the  foreclosure  suit 
and  to  prior  trustees,  to  bondholders’ 
committee,  &c. 

Trustees’  counsel  fees . 

Court  and  legal  expenses 
Office,  travelling,  examiners’  and  report¬ 
ing  fees  (less  paid  by  assignees) 

Advertising  foreclosure  meetings,  and 
expenses  organizing  New- York  and 
New-England  Railroad  .  .  .  4,866  33 

Assignees  in  Bankruptcy,  — 

For  equity  of  redemption,  &c . 

Total  expenses  attending  foreclosure,  &c. 

Add,  —  Expended  by  receivers,  completion  road  between 

Putnam  and  Willimantifc . 

A.  Expended  for  construction,  exclusive  of  bridges, 
Aug.  1,  1871,  to  Oct.  1,  1876  .... 


41,767  54 
79,601  00 
11,131  33 

25,096  73 


$220,044  97 


244,319  73 
100,000  00 
$564,364  70 

250,000  00 
293,249  96 


Amount  carried  forward 


.  $1,107,614  66 


1878.] 


APPENDIX. 


177 


Amount  brought  forward,  .  .  .  .  .  .  $1,107,614  66 

B.  Expended  for  equipment,  Aug.  1, 1871,  to  Oct. 

1,  1876  .  .  . .  270,608  57 

C.  Expended  for  stone  bridges,  abutments,  arches, 

and  viaducts,  Aug.  1,  1871,  to  Oct.  1,  1876  .  49,492  24 

C.  Expended  for  rebuilding  82  wooden  bridges, 

Aug  1,  1871,  to  Oct.  1,  1876  ....  140,340  71 

$1,568,056  18 

In  addition,  there  were,  between  Aug.  1, 1871, 
and  Oct.  1, 1876  (E),  228,635  ties  laid, 

costing . $97,547  17 

And  during  the  same  period  was  laid, 
costing  (D),  exclusive  of  .old,  .4,955 
tons  rails,  new  and  re-rolled  .  .  195,050  75 

-  -  *  292,597  92 

$1,860,654  10 

[Letters  refer  to  schedules  in  Annual  Report  of  New- York  and  New- 
England  Railroad  Company  for  year  ending  Sept.  30,  1876,  pages  24  to 
40  inclusive.] 

*  Not  treated  as  an  extraordinary  expenditure  by  Commissioners  in  any  computation 
made  by  them  in  Report. 


178 


APPENDIX. 


[Apr. 


Exhibit  No.  4. 

Bonds  outstanding  which  were  issued  under  Mortgages  made  on 
different  Portions  of  the  Road  'prior  to  the  Berdell  Mortgages :  — 


Norfolk  County  Railroad  Company  bonds  (interest  due 

from  1854,  at  6  per  cent) . 

Boston  and  New- York  Central  Railroad  Company  bonds 
(interest  due  from  1855,  at  6  per  cent)  .  .  .  . 

Charles-River  Railroad  Company  bonds  (interest  due  from 

1866,  at  6  per  cent) . 

New- York  and  Boston  Railroad  Company  notes  and  bonds 
(interest  due  from  1866,  at  6  per  cent)  . 

Boston,  Hartford,  and  Erie  Railroad  Company  bonds  (in¬ 
terest  due  from  1866,  at  7  per  cent)  .... 
Simple  interest  on  the  above  to  Jan.  31,  1877  . 


$3,600  00 

28,000  00 

13,200  00 

103,700  00 

280,000  00 
341,922  00 

*$770,422  00 


The  $3,600  Norfolk-County  Railroad  bonds  still  outstanding  are  pro¬ 
vided  for  by  funds  in  the  hands  of  J.  W.  Converse  of  Boston,  as  trustee: 
the  bonds  were  advertised  for  several  years  ago,  but  not  presented.  The 
total  amount  of  the  above  bonds,  with  interest,  is  treated  as  a  liability 
of  the  company  in  determining  the  value  of  the  property  of  the  corpora¬ 
tion  over  its  debts.  There  are  other  claims,  for  land-damages,  &c.,  which 
are  in  litigation,  not  exceeding  $50,000. 


*  These  bonds  have  not  been  carried  on  the  hooks  of  the  company,  because  the  extent  of 
the  company’s  liability  has  not  been  determined.  The  counsel  of  the  company  advises  that 
some  portion  of  them  were  not  legally  issued. 


1878.] 


APPENDIX. 


179 


Exhibit  No.  5. 


Hartford ,  Providence ,  and  Fishkill  Railroad  Company  Memoranda. 

Assets. 


Roadway  from  Providence  to  Hartford,  122.365  miles, 
estimated  at  $36,000  per  mile 
Equipment,  as  per  appraisal 
Machinery,  tools,  and  station  fixtures 
Materials  for  repair  of  roadway 
Fuel  and  supplies  .  .  . 

Due  from  companies  and  individuals 
Sinking-fund  in  hands  of  trustees  applied  or  applicable  to 
reduction  of  bonds  ....... 


From 
-Returns,  ■< 
1876. 


$4,405,140  00 
503,105  00 
58,228  16 
94,711  70 
64,729  73 
20,293  83 

316,807  36 


Total  Assets . $5,463,015  78 

Liabilities. 

Bonded  debt . $2,055,500  00 

Floating  liabilities  *  359,822  03 

Due  on  account  of  Tunnel  construction  *  .  26,503  45 

Total  Liabilities,  .... -  2,441,825  48 

Balance  of  Assets  over  Liabilities,  ....  $3,021,190  30 
*  Represented  by  cash  assets. 


180  - 


APPENDIX. 


[Apr. 


Exhibit  No. 

6. 

New -  York  and  New-England  Railroad  Company  Memoranda ,  as 

of  Jan.  31,  1877. 

Assets. 

Boad  from  Boston  to  Willimantic 

85.75  miles. 

Woonsocket  Division 

33.75  “ 

Dedham  Branch  ..... 

2.  “ 

Southbridge  Branch . 

Total  .  . . . 

Estimated  at  $36,000  per  mile  . 

$5,004,000  00 

Distributed  as  follows  :  —  - 

Grading  and  masonry,  bridging,  superstruc- 

ture,  land,  land-damages,  and  fences 

$4,756,965  81 

Passenger,  freight,  and  water  stations,  and 

fuel-sheds  ...... 

94,400  00 

Engine-houses,  car-sheds,  and  turn-tables, 

25,200  00 

Machine-shops,  including  machinery  and 
tools  (machine-shops,  $85,400;  machinery 

and  tools,  $42,034.19)  .... 

127,434  19 

$5,004,000  00 

Highland-Lake  Grove  property  .  .  * 

26,443  20 

Dwelling-houses  ...... 

7,600  00 

Equipment,  as  per  appraisal 

521,550  00 

Supplies  on  hand . 

12,006  37 

Balances  due  from  current  accounts  . 

3,060  45 

Cash  on  hand  ...... 

57,799  66 

Total  assets . 

$5,632,459  68 

Liabilities. 

First  mortgage-bonds  .... 

$343,000  00 

Notes  payable . 

215,544  09 

Notes  due  in  September,  1876  . 

513,500  00 

Bonds  outstanding,  with  interest,  which 
were  issued  prior  to  the  Berdell  bonds  (as 

per  Exhibit  No.  4)  .... 

770,422  00 

Total  liabilities  ....  -  1,842,466  09 


Balance  of  assets  over  and  above  liabilities  .  .  $3,789,993  59 

Balance  of  assets  over  and  above  liabilities,  Hartford, 

Providence,  and  Fishkill  Kailroad  Company,  as  per  Ex¬ 
hibit  No.  5  .  3,021,190  30 

Value  of  unfinished  road  from  Waterbury  to  Hopewell  - 
Junction,  65  miles,  at  $11,000  per  mile  ....  715,000  00 


Total  property  and  assets  above  liabilities,  not  treat¬ 
ing  Berdell  bonds  or  stock  as  a  liability  .  .  .  $7,526,183  89 


1878.] 


APPENDIX, 


181 


Exhibit  No.  7 


Equipment  as  per  App 


aisal. 


31  locomotives  .... 

$215,200  00 

44  passenger-cars  .... 

115,945  00 

2  parlor-cars  .... 

11,000  00 

26  baggage,  mail,  and  express  cars 

47,330  00 

113  8- wheel  freight-cars  . 

48,025  00 

133  8-wheel  flat-cars 

36,575  00 

29  8-wheel  dump-cars  . 

9,425  00 

13  4- wheel  box-cars 

2,600  00 

4  4-wheel  saloon-cars  . 

1,200  00 

130  4-wheel  dump-cars  . 

20,800  00 

1  derrick-car  .... 

300  00 

6  8-wheel  box-cars,  with  air-brake 

6,600  00 

4  8- wheel  milk-cars,  with  air-brake 

3,200  00 

4  8-wheel  meat-cars,  with  air-brake 

2,800  00 

1  8-wheel  tool-car 

300  00 

1  4-wheel  snow-plough 

250  00 

Total  equipment  . 


$521,550  00 


182 


APPENDIX, 


[Apr, 


Exhibit  No.  8. 


Memorandum  of  Settlements  with  Norwich  and  Worcester  Hail- 
Company  on  Lease  Account. 


To  pay  dividends  of,  — 

Deficiency. 

Surplus. 

July,  1870  * . 

.  1106,816  71 

January,  1871  .... 

10,341  77 

July,  1871 . 

.  54,311  81 

January,  1872,  settled  with  July  dividend 
July,  1872  . 

12,666  93 

January,  1873  .... 

$2,169  00 

July,  1873  . 

18,099  84 

January,  1874  .... 

9,909  05 

July,  1874  . 

19,857  30 

January,  1875 

1,019  38 

July,  1875  . 

.  12,153  16 

January,  1876  f  .... 

.  38,879  79 

July,  1876  . 

5,342  83 

January,  1877  .... 

14,449  45 

-Total  amount  paid  J 

.  $288,379  19 

Total  amount  received 

.  17,637  83 

17,637  83 

Balance  paid  over  amount  received 

.  $270,741  36 

*  This  deficiency  covered  extraordinary  disbursements  in  building  a  new  wharf  at  Norwich, 
which  were  said  to  have  been  authorized  by  the  Boston,  Hartford,  and  Erie  Railroad  Com¬ 
pany  prior  to  the  transfer  of  the  property  to  the  Receivers. 

t  This  deficiency,  caused  by  an  expenditure  of  this  amount  for  new  steel  rails,  charged  to 
operating  expenses. 

X  These  deficiencies,  prior  to  1875,  include  annual  payments  of  ten  thousand  dollars  to  a 
sinking-fund  held  by  the  Commonwealth  of  Massachusetts,  which  is  now  practically  equal  to 
the  debt,  and  payments  upon  it  have  therefore  ceased. 


1878.] 


APPEEDIX. 


183 


Exhibit  No.  9. 

Balance-Sheet  New- York  and  New-England  Railroad  Company , 
as  per  their  Books ,  Jan .  51,  1877. 


Assets. 

Cost  of  road  as  represented  by  Berdell  bonds  .  .  .  120,000,000  00 

Cost  of  new  construction  and  real  estate  ....  239,033  22 

Cost  of  new  equipment .  95,923  35 

Paid  underlying  liens,  created  by  receivers  and  trustee  .  626,772  90 

Paid  assignees  for  title  to  property .  100,000  00 

Operating  expenses .  241,830  54 

New  steel  rail  laid  (1,000  tons) .  63,303  04 

Interest  paid .  2,404  71 

Supplies  on  hand .  12,006  37 

Due  from  companies  and  individuals  ....  47,223  04 

Due  from  agents  and  conductors .  7,575  70 

Cash . 57,799  66 


121,493,872  53 


Liabilities. 


Capital  stock  issued . 

$5,685,000 

00 

Berdell  bonds  outstanding  * 

14,315,000 

00 

First  mortgage-bonds,  due  30  years  from 

Jan.  1,  1876  . 

343,000 

00 

Notes  payable . 

215,544 

09 

Notes  due  September,  1876 

513,500 

00 

Due  to  companies  and  individuals  . 

51,738 

29 

Coupons  unpaid  ..... 

17 

50 

Earnings . 

320,005 

01 

Profit  and  loss . 

50,067 

64 

- $21,493,872  53 

*  Convertible  into  New -York  and  New-England  Railroad  Company  stock,  but  not  other¬ 
wise  a  liability. 


184 


APPENDIX. 


[Apr. 


Estimates  of  Geo .  A.  Parker  of  the  Cost  of  completing  the  New- 
York  and  New-England  Railroad  from  Waterbury  to  the  Hud¬ 
son  River . 

Boston,  March.  18, 1878. 

W.  T.  Hart,  Esq.,  President  New-York  and  New-England  R.R.  Co. 

Dear  Sir, — I  have  your  favor  of  the  16th  instant,  in  which 
you  ask  me  to  “  advise  you  briefly  of  the  amount  of  my  estimate 
of  the  cost  of  completing  the  unfinished  portion  of  the  New-York 
and  NewT-England  Railroad  between  Waterbury  and  the  Hudson 
River.” 

The  estimate  to  which  you  allude  was  made  in  September,  1876, 
after  a  very  thorough  and  careful  examination.  It  provided  for  a 
finished  single-track  road,  with  steel  rails,  the  lines,  grades,  and 
workmanship  conforming  to  the  original  plan,  profile,  and  specifi¬ 
cations,  and  included  the  cost  of  ferry  accommodations  at  Fishkill 
Landing,  and  the  Dutchess  and  Columbia  Railroad  connections  at 
Hopewell  Junction  and  the  Hudson  River.  The  amount  of  the 
estimate  was  $1,600,000.  At  the  present  time  the  cost  of  labor 
and  materials  is  very  much  reduced  ;  and,  on  that  account,  this  esti¬ 
mate  may  now  require  to  be  considerably  diminished. 

Respectfully  yours, 

Geo.  A.  Parker. 


Boston,  March  20,  1878. 

W.  T.  Hart,  Esq.,  President  New-York  and  New-England  R.R.  Co. 

Dear  Sir,  —  In  a  communication  just  Received,  you  ask  if  I  am 
willing  to  “  support  my  opinion,  lately  expressed  to  you,  of  the 
cost  of  completing  the  New-York  and  New-England  Railroad  for 
sixteen  hundred  thousand  dollars,  by  a  bona  fide  proposal  to  take 
the  contract  for  that  sum.” 

While  I  deem  it  my  duty  to  say  that  your  Company  would  not 
be  justified  in  contracting  for  the  work  at  that  excessive  figure,  I 
have  no  unwillingness  to  repty  affirmatively  to  3’our  question.  I 
will,  if  called  upon,  contract  to  finish  the  road  for  the  sum  named, 
and  will  furnish  ample  security  for  the  fulfilment  of  such  contract. 

Respectfully  yours, 


Geo.  A.  Parker. 


